Assume That Interest Rates on 15-Year Noncallable Treasury and Corporate

question 68

Multiple Choice

Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows:
T-bond = 7.72%
A = 9.64%
AAA = 8.72%
BBB = 10.18%
The differences in rates among these issues were most probably caused primarily by:

• A) Tax effects.
• B) Default risk differences.
• C) Maturity risk differences.
• D) Inflation differences.
• E) Real risk-free rate differences.

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Definitions:

Static Address

A permanent Internet Protocol (IP) address assigned to a computer or device in a network, in contrast to a dynamically assigned IP address.

Dynamic Address

A changing IP address assigned by an internet service provider to a device each time it connects to the internet.

IP Address

A unique string of numbers separated by periods that identifies each device using the Internet Protocol to communicate over a network.

Circuit Switching

A method of communication where a dedicated channel or circuit is established for the duration of a transmission between two endpoints.