Question
When comparing a 1-year bond's price to a 30-year bond's price, the 1-year bond's price is relatively
(sensitive/insensitive) to interest rate changes.
(sensitive/insensitive) to interest rate changes.
Answers
GPT-4o mini
When comparing a 1-year bond's price to a 30-year bond's price, the 1-year bond's price is relatively **insensitive** to interest rate changes.
This is because shorter-term bonds, like a 1-year bond, have less duration and are less affected by fluctuations in interest rates compared to longer-term bonds, like a 30-year bond. Longer-term bonds have greater duration, which means their prices tend to be more sensitive to interest rate changes.
This is because shorter-term bonds, like a 1-year bond, have less duration and are less affected by fluctuations in interest rates compared to longer-term bonds, like a 30-year bond. Longer-term bonds have greater duration, which means their prices tend to be more sensitive to interest rate changes.