Compare the risk of a 90-day unsecured promissory note issued by Southwest Airlines to a 20-year U.S.Government Treasury Bond.
A)The Treasury Bond has a lower financial risk,but a higher interest rate risk.
B)The Treasury Bond has a lower financial risk and a lower interest rate risk.
C)The Treasury Bond has a lower interest rate risk,but higher financial risk.
D)The Treasury Bond has a higher interest rate risk,and a higher financial risk.

Question

Quizplus · Accepted Answer

The Treasury Bond has lower financial risk because it is backed by the U.S. government, but it has higher interest rate risk due to its longer maturity compared to the short-term promissory note.

Compare the Risk of a 90-Day Unsecured Promissory Note Issued