A Treasury Bond Due in 1 Year Has a Yield

question 88

Multiple Choice

A Treasury bond due in 1 year has a yield of 6.3%, while a Treasury bond due in 5 years has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corp. has a yield of 9.6%, while a bond due in 1 year issued by High Country Marketing Corp. has a yield of 6.8%. The default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp. are, respectively, ________ and ________.

• A).4%; .3%
• B) .4%; .5%
• C) .5%; .5%
• D) .5%; .8%

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Definitions:

Expenses

Costs incurred in the process of earning revenue, which are subtracted from revenues to calculate net income.

Financial Statements

Formal records of the financial activities and position of a business, person, or other entity.

Balance Sheet

A financial statement that provides a snapshot of a company’s financial position, showing assets, liabilities, and shareholders' equity at a specific point in time.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, indicating the net profit or loss.