A small company that issues bonds for the first time may have to offer them at a high yield because the bonds will
A)not be as liquid as many other corporate bonds.
B)be less risky than many other corporate bonds.
C)be less costly to gather information on than other corporate bonds.
D)be subject to a lower tax rate than other corporate bonds.

Question

Quizplus · Accepted Answer

A small company issuing bonds for the first time may have to offer them at a high yield because they are not as well-known to investors and therefore may not be as easily traded, meaning they may be less liquid than other corporate bonds. This increases the perceived risk of these bonds, which in turn requires a higher yield to entice investors to purchase them.

A Small Company That Issues Bonds for the First Time