Interest-rate risk can best be characterized as the risk that you could have earned a higher interest rate if you waited to purchase a bond. you could have gotten a lower interest rate if you waited to lock in a mortgage. the price of a financial asset will fluctuate in response to changes in market interest rates. short-term interest rates may exceed long-term interest rates. QUESTION 13 If interest rates unexpectedly fall sharply, which should you prefer to be holding--a 20-year Treasury bond or a Treasury bill? Treasury bill Treasury Bond You should be indifferent between the two. The answer cannot be determined without knowing the relative default risk. QUESTION 14 If fluctuations in the stock market prices become more stable, then, other things equal, the demand for long-term bonds should and the yield on long-term bonds should increase; increase increase; decrease decrease; decrease decrease increase