True or False: The longer the term of the bond, the greater the price changes and risk involved.

The statement is true. When a bond has a longer term to maturity, its price tends to be more sensitive to changes in interest rates, leading to greater price fluctuations. This sensitivity, often referred to as interest rate risk, is primarily due to the fact that a longer-term bond locks in its interest rate for a more extended period. If market interest rates rise, the fixed coupon payments from the bond become less attractive compared to new bonds issued at higher rates, causing the price of the longer-term bond to drop more significantly than that of a shorter-term bond.

Additionally, the longer the duration, the greater the uncertainty about future economic conditions that can affect the issuer's ability to pay back the bond at maturity, which contributes to the overall risk profile of the bond. Thus, investors demand a higher yield for longer-term bonds to compensate for these increased risks. This relationship between bond duration and price sensitivity is a fundamental concept in bond investing and highlights the risks inherent in longer-term debt securities.