An investment publication states the yield on the U.S. Treasury bond is 4.000%. The publication also states
Question:
An investment publication states the yield on the U.S. Treasury bond is 4.000%. The publication also states the yields on several long-term bonds, which are listed below. In column three below, report the yield spread of the long-term bonds relative to the U.S. Treasury bond. In column four below, list the characteristics discussed in chapter 3 (liquidity premium, default risk premium, and so forth) that explain the yield spread in column three. In column five below, indicate whether the characteristic increases (+) or decreases (-) the yield spread, all else equal. You do not need to explain the characteristics.
Long-term bonds | Interest rates or yields | Yield spread (bps) | Characteristics explaining the differences | Does characteristic increase (+) or decrease (-) yield spread |
Municipal bonds A-rated (A) | 3.850% | |||
High yield corporate bonds triple-C-rated (CCC) | 10.370% | |||
Argentinian government bonds (unrated) | 56.810% |
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill