n NISM Certifications
V-A NISM Series V-A
Medium

When the interest rates are rising, the bond funds which have short average maturity are more likely to outperform - State True or False?

Practice question from Nism VA Mock Test 5 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. True

    Correct answer

  2. B

    False

Why this is the answer

When interest rates rise, the prices of long-term bonds typically fall more than short-term bonds because long-term bonds are more sensitive to interest rate changes. Short-term bond funds are less impacted by rising interest rates, so they are more likely to outperform in such an environment.

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Nism VA Mock Test 5