How does the risk of long-term bonds compare with short-term bonds?
A) Long-term bonds are generally less risky than short-term bonds and so pay higher interest.
B) Long-term bonds are generally less risky than short-term bonds and so pay lower interest.
C) Long-term bonds are generally more risky than short-term bonds and so pay higher interest.
D) Long-term bonds are generally more risky than short-term bonds and so pay lower interest.

Question

Quizplus · Accepted Answer

Long-term bonds are generally more risky than short-term bonds because they have a longer maturity date, which increases the uncertainty of future market conditions. Therefore, long-term bonds generally pay higher interest rates to compensate for this increased risk.

How Does the Risk of Long-Term Bonds Compare with Short-Term