Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows: $$\text { T-6and =7.72\% } \quad \mathbf { A } = 9.64 \%$$
$\begin{array} { l l } \mathrm { AAA } = 8.72 \% & \mathrm { BBB } = 10.18 \% \end{array}$
The differences in rates among these issues were most probably caused primarily by:

Question

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The differences in interest rates among the different ratings of corporate bonds are primarily due to the differences in default risk. Higher-rated bonds have a lower risk of default and thus offer a lower interest rate. Similarly, lower-rated bonds have a higher risk of default and thus offer a higher interest rate to compensate for the increased risk. The difference in interest rates between Treasury bonds and corporate bonds can be attributed to the default risk premium included in the corporate bond rates. The other options (A, C, D, E) may also have an impact on interest rates, but they are not the primary reason for the differences observed in this question.

Assume That Interest Rates on 15-Year Noncallable Treasury and Corporate T-6and =7.72% A=9.64%\text { T-6and =7.72\% } \quad \mathbf { A } = 9.64 \% T-6and =7.72% A=9.64%

Assume That Interest Rates on 15-Year Noncallable Treasury and Corporate $\text { T-6and =7.72\% } \quad \mathbf { A } = 9.64 \%$