The _____________ is the difference in return earned by investing in a longer term bond that has the same credit risk as a shorter-term bond.

Question

Quizplus · Accepted Answer

The horizon risk premium is the difference between the return of a longer-term bond and a shorter-term bond with the same credit risk. This is because longer-term bonds are subject to greater uncertainty and price risk due to changes in interest rates and inflation over time. The other options (purchasing power spread, credit risk premium, and reinvestment risk spread) either do not specifically relate to the difference in return between short-term and long-term bonds or are not the best fit for this question.

The _____________ Is the Difference in Return Earned by Investing