When interest rates are rising, bond funds with a shorter average maturity are more likely to _____.
A
Outperform
B
Underperform
C
Show no change
D
Be unaffected
Correct Option:
A
Explanation
Bond prices move inversely to interest rates. Short-duration bond funds are less sensitive to rising interest rates than long-duration bond funds and therefore generally perform better, or decline less, during periods of rising interest rates.
