We Would Expect the Interest Rate on Bond a to Be

question 373

Multiple Choice

We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that

• A) Bond A was issued by a financially weak corporation and Bond B was issued by a financially strong corporation.
• B) Bond A was issued by the General Electric Corporation and Bond B was issued by the state of California.
• C) Bond A has a term of 20 years and Bond B has a term of 1 year.
• D) All of the above are correct.

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Definitions:

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