The lower a bond's default risk, the higher is the interest rate.

Name: The lower a bond's default risk, the higher is the interest rate.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The opposite is true. The higher a bond's default risk, the higher is the interest rate. This is because investors demand higher returns in exchange for taking on greater risk. Bonds with low default risk are seen as safer investments and therefore generally have lower interest rates.

The Lower a Bond's Default Risk, the Higher Is the Interest