Increases in the basic cost of long-term funds or in the risk will raise the required return on the bond.

Question

Quizplus · Accepted Answer

Increases in the basic cost of long-term funds (such as changes in interest rates) or in the risk associated with a particular bond (such as concerns about a company's financial stability) will increase the required return on the bond for investors. This is because investors will demand a higher return to compensate for the increased risk or cost of borrowing.

Increases in the Basic Cost of Long-Term Funds or in the Risk