Rank the following in order of highest to lowest interest rate:
A)1 year AAA municipal bond, 1 year AA municipal bond, 1 year corporate bond, 5 year corporate bond
B)5 year corporate bond, 1 year corporate bond, 1 year AAA municipal bond, 1 year AA municipal bond
C)5 year corporate bond, 1 year corporate bond, 1 year AA municipal bond, 1 year AAA municipal bond
D)1 year AA municipal bond, 1 year AAA municipal bond, 1 year corporate bond, 5 year corporate bond

Question

Rank the following in order of highest to lowest interest rate:
A)​1 year AAA municipal bond, 1 year AA municipal bond, 1 year corporate bond, 5 year corporate bond
B)​5 year corporate bond, 1 year corporate bond, 1 year AAA municipal bond, 1 year AA municipal bond
C)5 year corporate bond, 1 year corporate bond, 1 year AA municipal bond, 1 year AAA municipal bond
D)​1 year AA municipal bond, 1 year AAA municipal bond, 1 year corporate bond, 5 year corporate bond

Quizplus · Accepted Answer

Interest rates are generally higher for longer-term bonds and lower-rated bonds. Therefore, a 5-year corporate bond typically has the highest interest rate, followed by a 1-year corporate bond, a 1-year AA municipal bond, and finally a 1-year AAA municipal bond.

Rank the Following in Order of Highest to Lowest Interest