Assume That You Observe the Following Rates on Long-Term Bonds

question 47

Multiple Choice

Assume that you observe the following rates on long-term bonds: U.S. Treasury bonds = 4.15%
AAA Corporate bonds = 6.2%
BBB Corporate bonds = 7.15%
The main reason for the differences in the interest rates is:

• A) Maturity risk premium
• B) Inflation premium
• C) Default risk premium
• D) Convertibility premium

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