If 10-Year T-Bonds Have a Yield of 6

question 17

Multiple Choice

If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 8.5%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?

• A) 1.90%
• B) 2.09%
• C) 2.30%
• D) 2.53%
• E) 2.78%

Understand the implications of payments on liabilities.

Identify the normal balances of different account types.

Recognize the steps involved in recording business transactions.

Analyze changes in owner's capital.

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Definitions:

Cheating

Dishonest behavior or attempting to gain an unfair advantage in a competitive situation.

Marginal Cost

The advancement in overall fees incurred by producing an extra unit of a good or service.

Market Demand Curve

A graphical representation that shows the quantity of goods that consumers in a market are willing to buy at different prices.

Herfindahl-Hirschman Index (HHI)

A measure of market concentration that is calculated by squaring the market share of each firm competing in a market and then summing the squares.