The Yield to Maturity on ACL Bonds Maturing in 2005

question 65

Multiple Choice

The yield to maturity on ACL bonds maturing in 2005 is 8.75 percent.The yield to maturity on a similar maturity U.S.Government Treasury bond in 7.06 percent and the yield on Treasury bills is 6.51 percent.What is the default risk premium on the ACL bond?

• A)2.24%
• B)1.69%
• C)0.55%
• D)8.75%

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Definitions:

Nikkei Stock Index

A stock market index for the Tokyo Stock Exchange, representing the performance of leading companies in Japan.

FTSE

The Financial Times Stock Exchange Group, a company that specializes in index calculation. Often referenced with its indices such as the FTSE 100.

EAFE

An acronym for Europe, Australasia, and Far East, representing a stock index that measures the equity market performance outside the U.S. and Canada.

European, Australian, Far East

An acronym (EAFE) referring to a major stock market index that measures the equity market performance of developed markets outside of North America.