Thr rate of return you would get if you bought a bond and held it to its maturity date is called the bond's yield to maturity. If interest rates in the economy rise after a bond has been issued, what will happen to the bond's price and to its YTM? Does the length of time to maturity affect the extent to which a given change in interest rates will affect the bond's price?

When interest rates rise after a bond has been issued, the bond's price will generally decrease. This happens because the bond's fixed interest rate becomes less attractive compared to new bonds being issued at the higher interest rates. Conversely, when interest rates decrease, the bond's price may increase.

The yield to maturity (YTM) is the total return that an investor would earn if they held the bond until its maturity date. As the bond's price changes, the YTM will also adjust accordingly. When the bond's price decreases due to rising interest rates, the YTM will increase, making the bond more attractive to investors. Conversely, if the bond's price increases due to falling interest rates, the YTM will decrease.

The length of time to maturity does indeed affect the extent to which a given change in interest rates will impact the bond's price. Generally, longer-term bonds are more sensitive to changes in interest rates compared to shorter-term bonds. This sensitivity is known as duration. The longer the duration of a bond, the more its price will be affected by changes in interest rates. Therefore, a given change in interest rates will have a greater impact on the price of a longer-term bond compared to a shorter-term bond.