The Following Represents Two Yield Curves

question 70

Multiple Choice

The following represents two yield curves. What spread is expected between the one-year maturity B-rated bond and the one-year Treasury bond in one year?

• A)3.00 percent.
• B)5.06 percent.
• C)4.00 percent.
• D)5.00 percent.
• E)7.00 percent.

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Definitions:

Merchandising Company

A business that purchases goods and resells them at a higher price, typically without modification to the products.

Service Company

A business entity that provides professional services, expertise, or support to its clients rather than physical goods.

Gross Profit

The difference between revenue and the cost of goods sold, reflecting the core profitability of a company's operations.

Operating Expenses

Costs related to the normal day-to-day operations of a business, excluding the cost of goods sold.