27
QuizMultiple Choice

Buying Bonds

Question 27 • 26-27 Ignite Financial Literacy Personal Finance - EL3403

Why is a bond with a higher interest rate often considered a higher risk investment?

Answer
A
More secure bonds have higher interest rates.
B
A higher interest rate means a higher rate of return on the investment.
C
A higher interest rate would provide too much of a return on the investment.
D
Some companies promise higher interest rates in order to attract the attention of investors.

Explanation

Investors generally expect a higher return when they take on more risk. A company that may be less likely to repay its bonds might offer a higher interest rate to attract investors, which matches the choice about companies using higher rates to get investors’ attention.

AI-written and checked against the verified answer.

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