Jerry has the choice of two bonds, one that pays 3 percent interest and one that pays 6 percent interest. Which of the following is most likely?

Question

Quizplus · Accepted Answer

Typically, bonds with higher interest rates also come with longer terms, meaning that the 6 percent bond likely has a longer term than the 3 percent bond. Therefore, though the 6 percent bond may offer higher returns, it may also come with greater risk due to the longer time horizon. The other answer choices do not necessarily hold true as there are many factors that can determine a bond's risk level and issuer type, and the interest rate does not necessarily correlate with these factors.

Jerry Has the Choice of Two Bonds, One That Pays