A Treasury Bond Due in One Year Has a Yield

question 40

Multiple Choice

A Treasury bond due in one year has a yield of 4.3%; a Treasury bond due in five years has a yield of 5.06%. A bond issued by Boeing due in five years has a yield of 7.63%; a bond issued by Caterpillar due in one year has a yield of 7.16%. The default risk premiums on the bonds issued by Boeing and Caterpillar, respectively, are

• A) 3.33% and 2.10%.
• B) 2.57% and 2.86%.
• C) 1.2% and 1.0%.
• D) 0.76% and 0.47%.
• E) None of the options are correct.

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Definitions:

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