Step-by-step explanation:
The interest rate on a security varies inversely with:
a. the safety of the security: As the safety of a security increases, the interest rate decreases. Safer securities are considered to have lower risk, so investors are willing to accept a lower return.
b. the length of the term of the security (usually): Generally, as the length of the term of a security increases, the interest rate also increases. Longer-term securities often offer higher interest rates to compensate investors for the additional risk and uncertainty associated with tying up their funds for an extended period.
c. the time remaining until its maturation: The interest rate tends to decrease as the time remaining until the security's maturation decreases. Shorter-term securities usually have lower interest rates compared to longer-term ones.
d. the value of its principal: The interest rate may not directly vary with the value of the principal. However, for some securities, a larger principal may enable the issuer to offer a slightly higher interest rate, especially in certain bond markets.
It's essential to note that these relationships may not always hold true in all situations, as interest rates are influenced by a wide range of factors, including overall economic conditions, market demand, and central bank policies.