Question

What are the benefits of a long-term bond over a short-term bond?

a.
Long-term bonds have fewer risks than short-term bonds.
b.
Long-term bonds have more risks associated with them, and bring in lower returns for the initial investment.
c.
While long-term bonds have more risks associated with them, they have the potential to bring in higher returns for the initial investment.
d.
Long-term bonds always have a higher return for the investment

Answer 1

(C) While long-term bonds have more risks associated with them, they have the potential to bring in higher returns for the initial investment.

Explanation:

Answer 2

The correct answer is option C.

Explanation:

c. While long-term bonds have more risks associated with them, they have the potential to bring in higher returns for the initial investment.

The disadvantage of short-term bonds is that they pay lower interest rates than long-term bonds. Long term bonds have a greater chance of getting higher rates as there is a greater probability that with time, the interest rates increase. Long term bonds are generally those, that people keep for almost 10 years.