Term premium refers to
A)the interest rate on a long-term bond minus the average interest rate on future short-term bonds.
B)the interest rate on a long-term bond plus the average interest rate on future short-term bonds.
C)the average interest rate on future short-term bonds.
D)the standard deviation of the interest rate on long-term bonds.

Question

Quizplus · Accepted Answer

Term premium refers to the additional compensation investors require for holding longer-term bonds instead of rolling over shorter-term bonds. Therefore, it is the difference between the interest rate on a long-term bond and the average interest rate on future short-term bonds.

Term Premium Refers to