A Treasury Bond Due in One Year Has a Yield

question 19

Multiple Choice

A Treasury bond due in one year has a yield of 2.5%; a Treasury bond due in ten years has a yield of 4.1%. A bond issued by Amazon due in ten years has a yield of 9.5%; a bond issued by Google due in one year has a yield of 7.3%. The default risk premiums on the bonds issued by Amazon and Google, respectively, are

• A) 3.7% and 3.1%.
• B) 4.3% and 5.4%.
• C) 5.4% and 4.8%.
• D) 6.6% and 7.9%.
• E) None of the options are correct.

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Definitions:

Business Transactions

Economic events that affect the financial position of a company and are recorded in its accounts.

Balance Sheet

A document presenting an organization’s assets, obligations, and equity of shareholders on a specific date.

Short-term Investments

Financial instruments and assets that are expected to be converted into cash or sold within a period of one year or less.