In terms of riskiness, how do long-term bonds and short-term bonds compare?
A) Short-term bonds are more risky and so pay higher interest.
B) Short-term bonds are less risky and so pay lower interest.
C) Short-term bonds are less risky and so pay higher interest.
D) Short-term bonds have about the same degree of risk and so pay about the same interest.

Question

Quizplus · Accepted Answer

Short-term bonds are generally considered to be less risky than long-term bonds as they are less affected by changes in interest rates and inflation. Therefore, they typically pay lower interest rates than long-term bonds.

In Terms of Riskiness, How Do Long-Term Bonds and Short-Term