Assume That Interest Rates on 20-Year Treasury and Corporate Bonds $\begin{array} { l c } \text { T-bond } = 7.72 \% & \mathrm {~A} = 9.64 \% \\\mathrm { AAA } = 8.72 \% & \mathrm { BBB } = 10.18 \%\end{array}$

question 63

Multiple Choice

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings,all of which are noncallable,are as follows:
$\begin{array} { l c } \text { T-bond } = 7.72 \% & \mathrm {~A} = 9.64 \% \\\mathrm { AAA } = 8.72 \% & \mathrm { BBB } = 10.18 \%\end{array}$
The differences in rates among these issues were most probably caused primarily by:

• A) Real risk-free rate differences.
• B) Tax effects.
• C) Default risk and liquidity differences.
• D) Maturity risk differences.
• E) Inflation differences.

---

Definitions:

Inventory Shipped on Consignment

Goods sent by a vendor (consignor) to a consignee, which are held by the consignee until sold; the consignor retains ownership until the goods are sold.

Consignee

The individual or entity that is legally permitted to receive goods but does not have ownership rights over the cargo until the consignment is paid for or sold.

LIFO Cost Flow Assumption

A method in accounting that assumes the last items of inventory purchased are the first ones sold.

Inventory Account

An account in financial accounting that tracks the value of a company's goods intended for sale, including raw materials, work-in-progress, and finished goods.