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You would expect a bond of the U.S. government to pay higher interestrate as compared to a bond of an Eastern European government.

A. True
B. False

1 Answer

3 votes

Answer: False

Step-by-step explanation:

Bond interest is determined in part by the riskiness of the Issuer of the bond. The United States is one of the most trust-worthy countries in the world and this is reflected by the US T-bills being considered a risk-free asset the world over.

The less risky an asset is, the less interest it has to pay as it does not have to compensate its investors for more added risk. A United States Bond is definitely safer than an Eastern European Government bond who are not as developed as the Western Europeans speaking in an unbiased manner. Therefore the US Bond will pay a lower interest relative to a bond of an Eastern European government.

User Arnaud Delubac
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