Rank the Following Bonds in Order from Lowest Credit Risk

question 18

Multiple Choice

Rank the following bonds in order from lowest credit risk to highest risk all with the same time to maturity, by their yield to maturity: JM Corporate bond with yield of 12.25 percent, IB Corporate bond with yield of 4.49 percent, TC Corporate bond with yield of 8.76 percent, and B&O Corporate bond with a yield of 5.99 percent.

• A) JM bond, TC bond, B&O bond, IB bond
• B) IB bond, B&O bond, TC bond, JM bond
• C) TC bond, B&O bond, IB bond, JM bond
• D) JM bond, IB bond, B&O bond, TC bond

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Definitions:

Cigarette Taxes

A tax levied on cigarettes to increase their price and decrease their consumption for health policy reasons.

Demand for Cigarettes

refers to the total quantity of cigarettes that consumers are willing and able to purchase at a given price level over a specific period of time.

Elastic

A characteristic of a good or service that indicates a high sensitivity of quantity demanded or supplied to changes in its price.

Normal Goods

Goods for which demand increases as the income of the consumer increases and falls when the income of the consumer decreases, all else being equal.