Which of the following affects the cost of a bond?

Question

Quizplus · Accepted Answer

The maturity of a bond affects its cost because longer-term bonds typically offer higher yields to compensate for the additional risk associated with the longer maturity. Short-term bonds typically have lower yields because they are considered less risky.

Answer: C
 If a company uses the proceeds of a bond issue to purchase fixed assets, this can affect the cost of the bond because investors may view this as an indication of the company's ability to generate future cash flows and repay the bond.

Therefore, the correct answers are A and C.

Which of the Following Affects the Cost of a Bond