We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that
A)the credit risk associated with Bond A is lower than the credit risk associated with Bond B.
B)Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation.
C)Bond A has a term of 20 years and Bond B has a term of 2 years.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Longer-term bonds typically have higher interest rates than shorter-term bonds due to the increased risk over a longer period and the expectation of higher returns for investors.

We Would Expect the Interest Rate on Bond a to Be