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 because bond prices and yields are inversely related. As maturity increases, the yield also increases. Therefore, bonds with longer maturities will have higher yields than those with shorter maturities, even if they have the same tax status and ratings.

Bonds with the Same Tax Status and Ratings