In a recent year,interest rates on long-term government and corporate bonds were as follows:
T-bond= 7.72%
A= 9.64%
AAA= 8.72%
BBB= 10.18%
The differences in rates among these issues were caused primarily by
A) Tax effects.
B) Default risk differences.
C) Maturity risk differences.
D) Inflation differences.
E) Answers b and d are both correct.

Question

Quizplus · Accepted Answer

The differences in rates among these issues were primarily caused by default risk differences. T-bonds are backed by the US government, which is considered to have a low risk of default. A-rated and AAA-rated corporate bonds are issued by companies with a lower risk of default compared to BBB-rated bonds, which have a higher risk of default. Inflation and tax effects may also influence interest rates, but they are not the primary factors in this case.

In a Recent Year,interest Rates on Long-Term Government and Corporate