The risk premium, or spread, between corporate bonds and Treasury securities tends to increase as the time to maturity increases.

Question

Quizplus · Accepted Answer

This is because longer maturity periods represent a greater uncertainty and risk for the investor, as there are more factors that can affect the bond's performance over that extended time period. Therefore, investors demand a higher return for taking on this added risk, leading to an increase in the risk premium or spread.

The Risk Premium, or Spread, Between Corporate Bonds and Treasury