The Following Yields on 20-Year Bonds Prevailed in January for the Three

question 33

Multiple Choice

The following yields on 20-year bonds prevailed in January for the three securities shown: $\begin{array}{lr}\text { Aa-rated corporate bond } & 9.98 \% \\\text { Baa-rated corporate bond } & 10.34 \% \\\text { B-rated corporate bond } & 11.12 \%\end{array}$ The difference in yields is due primarily to ____ risk premium.

• A) maturity
• B) default
• C) seniority
• D) financial

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Definitions:

Laspeyres Price Index

A price index used to measure the change in the cost of purchasing a fixed basket of goods and services over time, based on the quantities purchased in the base period.

Consumption Bundle

A set of goods or services that an individual or household chooses to consume within a given period, reflecting their preferences and budget constraint.

Prices

Monetary values assigned to goods and services, determining what amount of money is needed to purchase them.

Laspeyres Price Index

A measure of the change in the aggregate price level of a basket of goods and services over time, using the quantities purchased in the base year.