00:01
Hi, so the question is asking for the statement that describes bond markets.
00:07
We have four options here.
00:11
Let's evaluate these options.
00:13
Option a, the longer the term, the lower the interest rate.
00:16
This is generally not true.
00:19
Longer term bonds usually have higher interest rates to compensate for the increased risk of changes in the market.
00:27
And the longer time until repayment so option a is false option b we have the higher the risk of default the lower the interest rate so this is also false if a bond has a higher risk of default the issuer must offer a higher interest rate to attract investors to take on that risk okay so so, hence, b is false.
00:58
Then c, bondholders are partial owners of the firm.
01:03
So, this is not true...