There Is a Natural Tendency for the Yield on Long-Term

question 42

Multiple Choice

There is a natural tendency for the yield on long-term bonds to be greater than on short-term bonds because:

• A)holders of long-term bonds benefit most from a fall in interest rates.
• B)reinvestment risk is more pronounced for long-term bonds than short-term bonds.
• C)long-term bonds are more price-sensitive than short-term bonds.
• D)the risk of default is greater for long-term bonds.

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