The term structure of interest rates is upward sloping for all bond types. A certain AAA rated non-callable 10-year corporate bond has been issued at a 6.15% promised yield. Which one of the following bonds probably has a higher promised yield?

Question

Quizplus · Accepted Answer

The callable bond typically offers a higher promised yield than the non-callable bond, and the longer maturity also typically results in a higher yield. Therefore, the callable AAA rated corporate bond with a 15-year maturity is most likely to have a higher promised yield than the 10-year non-callable corporate bond with a 6.15% promised yield.

The Term Structure of Interest Rates Is Upward Sloping for All