If bonds with different maturities are perfect substitutes,then the ________ on these bonds must be equal.
A)expected return
B)surprise return
C)surplus return
D)excess return

Question

Quizplus · Accepted Answer

If bonds with different maturities are perfect substitutes, investors would only consider their expected returns when deciding which bond to invest in. The surprise return, surplus return, and excess return would not matter because they do not differentiate between the bonds based on their maturities. Therefore, the expected return on these bonds must be equal.

If Bonds with Different Maturities Are Perfect Substitutes,then the ________