What is the impact of interest rate changes on the value of a bond near its maturity date?

The impact of interest rate changes on the value of a bond near its maturity date depends on whether the bond has a fixed or floating interest rate.

For a fixedrate bond, the value will be more sensitive to interest rate changes as the bond approaches its maturity date. When interest rates rise, the bond's value will decline, and when interest rates fall, the bond's value will increase. This is because as interest rates rise, newer bonds are issued with higher yields, making existing bonds with lower yields less attractive to investors. As the bond approaches its maturity date, the impact of interest rate changes on its value becomes more significant since there is less time for the bond to recover from any price declines caused by rising interest rates.

For a floatingrate bond, the interest rate is adjusted periodically based on a benchmark rate, such as the London Interbank Offered Rate (LIBOR). Therefore, changes in interest rates will have less of an impact on the value of a floatingrate bond compared to a fixedrate bond.