Bonds with the same tax status and ratings:
A) always have the same yield.
B) can have different yields due to different maturities.
C) should sell for the same price.
D) will still have different yields depending on their face values.

Question

Quizplus · Accepted Answer

Bonds with the same tax status and ratings can have different yields due to different maturities. This is because longer-term bonds carry a higher risk of inflation and interest rate changes, which can affect their yields. Therefore, investors may demand a higher yield for longer-term bonds to compensate for this extra risk. While face values can also affect yields, this is not specific to bonds with the same tax status and ratings.

Bonds with the Same Tax Status and Ratings