There is a natural tendency for the yield on long-term bonds to be greater than on short-term bonds because:
A)holders of long-term bonds benefit most from a fall in interest rates.
B)reinvestment risk is more pronounced for long-term bonds than short-term bonds.
C)long-term bonds are more price-sensitive than short-term bonds.
D)the risk of default is greater for long-term bonds.

Question

Quizplus · Accepted Answer

Long-term bonds are more price-sensitive than short-term bonds, which means they have higher interest rate risk, leading to higher yields to compensate investors for this risk.

There Is a Natural Tendency for the Yield on Long-Term