Suppose Two Corporate Bonds with Similar Risk Pay Different Rates

question 108

Multiple Choice

Suppose two corporate bonds with similar risk pay different rates of return. The process of arbitrage should

• A) not affect their rates of return.
• B) increase the return on the asset with the higher rate of return as the demand for it increases.
• C) increase the gap between the two rates of return.
• D) eventually equalize their rates of return.

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