Consider the Following Yields to Maturity on Various One-Year, Zero-Coupon

question 21

Multiple Choice

Consider the following yields to maturity on various one-year, zero-coupon securities: The credit spread of the B corporate bond is closest to ________.

• A)1.4%
• B)1.70%
• C)2.80%
• D)0.70%

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Definitions:

Diminishing Marginal Returns

A principle stating that as additional units of a variable input are added to a fixed input, the additions to output will eventually decrease.

Law of Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase if other variables remain constant.

Total Cost

The aggregate of expenses related to the manufacturing of products or provision of services, which includes costs that stay the same as well as those that vary.

Fixed Costs

Expenses that do not vary with the level of production or business activity, such as rent, salaries, and insurance premiums, remaining constant regardless of output.