Interest rates are typically lower on low-risk bonds because they are seen as safer investments, and thus investors are willing to accept a lower return. High-risk bonds need to offer higher interest rates to attract investors due to the increased risk of default.

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Interests Rates

Question 112

Multiple Choice

Interests rates

A) are usually higher on short-term bonds than on long-term bonds.
B) are usually lower on low-risk bonds and higher on high-risk bonds.
C) for short-term bonds tend to fall when interest rates for long-term bonds rise.
D) are usually higher on low-risk bonds and lower on high-risk bonds.
E) for short-term bonds tend to rise when interest rates for long-term bonds fall.

Correct Answer: