Assume That Interest Rates on 20-Year Treasury and Corporate Bonds

question 44

Multiple Choice

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows: T-bond = 7.72%
A = 9.64%
AAA = 8.72%
BBB = 10.18%
What most probably caused the differences in rates among these issues?

• A) real risk-free rate differences
• B) default risk differences
• C) maturity risk differences
• D) inflation differences

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The ordering of choices or options according to their desirability or priority to an individual or group.

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