Explanation

Correct Answer: B

This statement is accurate because:

1. Short-term rates are more volatile than long-term rates: Short-term interest rates are more sensitive to monetary policy changes, economic cycles, and market expectations, making them more volatile than long-term rates which reflect longer-term economic expectations.

2. Long-term bond prices are more volatile than short-term bond prices: Bond price volatility is measured by duration. Long-term bonds have higher duration, meaning their prices are more sensitive to interest rate changes. For a given change in interest rates, long-term bond prices will fluctuate more than short-term bond prices.

Why other options are incorrect:

• Option A: Incorrect because while short-term rates are more volatile, short-term bond prices are actually less volatile than long-term bond prices due to lower duration.
• Option C: Incorrect because long-term rates are typically less volatile than short-term rates, though long-term bond prices are indeed more volatile.