Assume That Interest Rates on 20-Year Treasury and Corporate Bonds $\text { T-bond } = 7.72 \% \quad \text { AAA } = 8.72 \% \quad \text { A } = 9.64 \% \quad \text { BBB } = 10.18 \%$

question 14

Multiple Choice

Assume that interest rates on 20-year Treasury and corporate bonds are as follows:
$\text { T-bond } = 7.72 \% \quad \text { AAA } = 8.72 \% \quad \text { A } = 9.64 \% \quad \text { BBB } = 10.18 \%$
The differences in these rates were probably caused primarily by:

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

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Definitions:

Equilibrium Quantity

The quantity of goods supplied that is equal to the quantity demanded at the market equilibrium price.

Equilibrium Price

The market price at which the supply of an item matches its demand, leading to economic stability in the market.

Supply Curve

An illustrative diagram depicting the link between the cost of an item and the volume merchants are ready to provide.

Supply Curve

A graphical representation showing the correlation between the price of a good or service and the amount that suppliers are willing to produce and sell at each price level.