The prices of long$-$term bonds

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whenever interest rates rise. Because interest rates can and do occasionally rise, all long$-$term bonds, even Treasury bonds, have an element of risk called

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rate risk. Therefore, a

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risk premium, which is higher the longer the term of the bond, is included in the required interest rate. While long$-$term bonds are heavily exposed to

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rate risk, short$-$term bills are heavily exposed to

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rate risk. Although investing in short$-$term T$-$bills preserves one's

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$,$ the interest income provided by short$-$term T$-$bills is

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stable than the interest income on long$-$term bonds.