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% BBB=10.18% AAA = 8.72% The differences in rates among these issues were most probably caused primarily by: O a. Maturity risk differences. O b. Tax effects. c. Default risk and liquidity differences. d. Real risk-free rate differences. e. Inflation differences.
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% BBB=10.18% AAA = 8.72% The differences in rates among these issues were most probably caused primarily by: O a. Maturity risk differences. O b. Tax effects. c. Default risk and liquidity differences. d. Real risk-free rate differences. e. Inflation differences.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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![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%
BBB = 10.18%
AAA = 8.72%
The differences in rates among these issues were most probably caused primarily by:
a. Maturity risk differences.
b. Tax effects.
c. Default risk and liquidity differences.
d. Real risk-free rate differences
e. Inflation differences.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7e0d7b09-1b11-4fc1-a039-aff6dda2499b%2F55c67dea-ad6a-46cd-bd8d-734994a62f5a%2Fnad8zx_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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%
BBB = 10.18%
AAA = 8.72%
The differences in rates among these issues were most probably caused primarily by:
a. Maturity risk differences.
b. Tax effects.
c. Default risk and liquidity differences.
d. Real risk-free rate differences
e. Inflation differences.
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