Use the Information for the Question(s)below

question 5

Multiple Choice

Use the information for the question(s) below.
-The above table shows the yields to maturity on a number of one-year,zero-coupon securities.What is the credit spread on a one-year,zero-coupon corporate bond with a B rating?

• A)0.7%
• B)1.7%
• C)1.8%
• D)6.9%

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Definitions:

Diamond-water Paradox

The contradiction observed in value theory where essential goods like water have low prices, while non-essential goods like diamonds have high prices.

Essential Goods

Products that are necessary for basic living and well-being, often unchanged by changes in income.

Nonessential Goods

Products and services considered as non-critical for survival or basic living standards.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with cheaper ones.