Government bonds have lower yield to maturity than do corporate bonds of the same maturity because the ________ premium is lower for government bonds.

Question

Quizplus · Accepted Answer

Government bonds are considered to have a lower default risk compared to corporate bonds, as they are backed by the government's ability to tax and print money. Therefore, investors demand a lower premium for holding government bonds, resulting in lower yield to maturity compared to corporate bonds of the same maturity. The other answer choices (interest rate risk, inflation, and maturity) may also affect bond yields, but they do not necessarily explain why government bonds have lower yields compared to corporate bonds.

Government Bonds Have Lower Yield to Maturity Than Do Corporate