A maturity premium is offered on long-term Treasury bonds due to:
A) the risk of changing interest rates.
B) the risk of default.
C) their specific risk.
D) the uncertainty of their maturity date.

Question

Quizplus · Accepted Answer

The maturity premium is offered on long-term Treasury bonds due to the risk of changing interest rates. As interest rates may fluctuate over a long period of time, long-term bondholders are more exposed to interest rate risk than short-term bondholders. To compensate for this additional risk, long-term bonds carry a maturity premium.

A Maturity Premium Is Offered on Long-Term Treasury Bonds Due