13) Assume that interest rates on 6-year Treasury bonds and 6-year Corporate bonds, with different ratings,...
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13) Assume that interest rates on 6-year Treasury bonds and 6-year Corporate bonds, with different ratings, all of which are noncallable, are as follows: T-bond 7.2% A (Corp Bond) = 9.6% BBB (Corp Bond)- 10.2% AAA (Corp Bond)= 8.2% The differences in rates among these issues were most probably caused primarily by: A) Real risk-free rate differences. B) Market demand and default risk differences. C) Default risk and federal deficit risk differences. D) Maturity risk and liquidity risk differences. E) None of the above combinations are correct. 13) Assume that interest rates on 6-year Treasury bonds and 6-year Corporate bonds, with different ratings, all of which are noncallable, are as follows: T-bond 7.2% A (Corp Bond) = 9.6% BBB (Corp Bond)- 10.2% AAA (Corp Bond)= 8.2% The differences in rates among these issues were most probably caused primarily by: A) Real risk-free rate differences. B) Market demand and default risk differences. C) Default risk and federal deficit risk differences. D) Maturity risk and liquidity risk differences. E) None of the above combinations are correct.
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A Real risk free differences The real riskfree rate is the yield of the 3month Tbill minus the impac... View the full answer
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Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
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