The additional incentive that the purchaser of a Treasury security requires to buy a long-term security rather than a short-term security is called the
A)risk premium.
B)term premium.
C)tax premium.
D)market premium.

Question

Quizplus · Accepted Answer

The term premium is the additional incentive that a purchaser of a Treasury security requires to buy a long-term security rather than a short-term security. The term premium compensates the investor for the uncertainty associated with holding a longer-term security. The other options are not correct - risk premium refers to the compensation an investor requires for taking on additional risk, tax premium is not a recognized term, and market premium is a term used in finance to refer to the additional return expected by an investor for taking on market risk.

The Additional Incentive That the Purchaser of a Treasury Security