Bonds with similar ratings and different terms to maturity tend to have different yields.

Question

Quizplus · Accepted Answer

Bonds with similar ratings but different terms to maturity have different yields because they have different levels of interest rate risk. Longer-term bonds are more sensitive to changes in interest rates than shorter-term bonds, so investors typically demand higher yields as compensation for taking on this risk. Additionally, bonds with longer maturities have more uncertainty about future economic conditions, which also affects their yields.

Bonds with Similar Ratings and Different Terms to Maturity Tend