Which of the following statements is true?
A)The more liquid the bond, the lower the interest rate.
B)Tax-free bonds normally have a higher interest rate than other types of bonds.
C)The price of a bond increases as it becomes more risky.
D)The yield curve illustrates the relative risks of alternative types of bonds.

Question

Quizplus · Accepted Answer

Liquidity refers to how easily an asset can be converted into cash without affecting its market price. More liquid bonds are generally considered safer and therefore can be issued at a lower interest rate. Investors are willing to accept lower returns for the ease of buying and selling the bond.

Which of the Following Statements Is True