Final answer:
The additional incentive that the purchaser of a Treasury security requires to buy a long-term security rather than a short-term security is called the term premium.
Step-by-step explanation:
The additional incentive that the purchaser of a Treasury security requires to buy a long-term security rather than a short-term security is called the term premium.
When buying bonds, investors expect to receive a rate of return. However, the rates of return vary based on the riskiness of the borrower. In addition to compensation for delaying consumption and adjustment for inflation, a term premium is added to account for the borrower's riskiness.