Which of the following bonds has the highest interest rate?
A)A high credit risk and a short term
B)A low credit risk and a short term
C)A long term and a high credit risk
D)A long term and a low credit risk

Question

Quizplus · Accepted Answer

Bonds with a high credit risk (or lower credit quality) typically offer higher interest rates to compensate investors for the increased risk of default. Additionally, long-term bonds generally offer higher interest rates than short-term bonds to compensate for the increased risk over time, including inflation risk and the uncertainty of future economic conditions. Therefore, a bond that is both long-term and has a high credit risk would offer the highest interest rate among the options provided.

Which of the Following Bonds Has the Highest Interest Rate