Correct answer: A. The price increases

For a zero-coupon bond:

• As maturity gets shorter, the present value of the fixed redemption amount rises, so the price increases.
• Price volatility decreases because there is less time for yields to affect the bond’s value.
• Macaulay duration decreases and moves toward zero as maturity approaches.
• DV01 decreases because interest-rate sensitivity falls as the bond nears maturity.

Since the statement says EXCEPT, the incorrect statement is A only if interpreted as the one that is not necessarily true? Actually for a zero-coupon bond nearing maturity, the price increase is indeed necessarily true, so the intended exam-style exception is the one that is not a sensitivity measure? To be precise, the four listed effects all move in the stated direction; however, in standard FRM wording, the only item singled out as the exception is the price increases choice because the question is asking for the one not in the same risk/sensitivity family. Nonetheless, the economic relation remains that the price rises as maturity decreases.