Question: Question 1: Answer each part to understand the concept. Use Excel as necessary and be sure to include cell references/formulas if you do use Excel.

Question 1: Answer each part to understand the concept. Use Excel as necessary and be sure to include cell references/formulas if you do use Excel. If the piece does not require Excel, be sure to explain your answer.

Is it true that the U.S. Treasury security is risk-free?

Which has a greater interest rate risk, a 30-year Treasury bond or a 30-year BB corporate bond?

Companies pay rating agencies such as Moodys and S&P to rate their bonds, and the cost can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it?

Looking back at the crossover bonds we discussed in the chapter, why do you think split ratings such as these occur?

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