Which factor influences the required rate of return on a bond?

The required rate of return on a bond is significantly influenced by the maturity of the bond and its associated risk. Generally, as the maturity of a bond increases, the uncertainty about future events also increases, leading to greater risk for investors. Longer maturities are typically associated with fluctuating interest rates and economic conditions, which means investors expect a higher return for taking on that additional risk.

In addition, bonds with higher risks, such as those issued by companies with lower credit ratings, will command higher required rates of return to compensate investors for the potential of default. Therefore, both the maturity and the risk profile of the bond affect what investors expect to earn from holding it, hence determining the required rate of return.

Market demand for stocks, historical interest rates, and an issuing company's stock performance may have indirect effects on bond pricing, but they do not directly dictate the required rate of return on a bond in the same way that maturity and risk do.