A Treasury bond due in one year has a yield of 5.7%; a Treasury bond due in 5 years has a yield of 6.2%.A bond issued by Ford Motor Company due in 5 years has a yield of 7.5%; a bond issued by Shell Oil due in one year has a yield of 6.5%.The default risk premiums on the bonds issued by Shell and Ford, respectively, are
A) 1.0% and 1.2%.
B) 0.7% and 1.5%.
C) 1.2% and 1.0%.
D) 0.8% and 1.3%.
Correct Answer:
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A)pays
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