Treasury bonds have provided a higher historical return than Treasury bills, which can be attributed to:
A)Greater default risk
B)A higher level of unique risk
C)Greater price risk due to longer maturities
D)The fact that they are less frequently traded than bills

Question

Quizplus · Accepted Answer

Treasury bonds have longer maturities, which makes them more susceptible to price changes due to changes in interest rates. This higher price risk has historically resulted in a higher return for investors in comparison to Treasury bills, which have shorter maturities and thus less price risk. A and B are incorrect, as Treasury bonds are considered to have very low default risk and are less exposed to unique risk due to their size and government backing. D is also incorrect, as Treasury bonds are actually more frequently traded than bills due to their popularity among institutional investors.

Treasury Bonds Have Provided a Higher Historical Return Than Treasury