High-liquidity bonds usually have lower interest rates than low-liquidity bonds.

Question

Quizplus · Accepted Answer

High-liquidity bonds are easier to buy and sell, meaning there is a larger market for them. This leads to lower interest rates because the demand for them is higher, reducing the yield required by investors. Conversely, low-liquidity bonds have fewer buyers and sellers, leading to higher interest rates to compensate for the risk and cost of holding the bond.

High-Liquidity Bonds Usually Have Lower Interest Rates Than Low-Liquidity Bonds