Which one of these is included in the yield of a bond with a low credit rating but not included in a U.S.Treasury bond yield? Assume both bonds are selling at a premium.
A) Real rate of return
B) Inflation premium
C) Default premium
D) Loss of premium

Question

Quizplus · Accepted Answer

The default premium is included in the yield of a bond with a low credit rating but not in a U.S. Treasury bond yield. This is because there is a higher risk of default associated with bonds with a low credit rating, which requires compensation in the form of a higher yield for investors. The real rate of return and inflation premium would be included in both bonds, while the loss of premium is not a factor in this scenario since both bonds are selling at a premium.

Which One of These Is Included in the Yield of a Bond