What is the most important difference between a corporate bond and an equivalent U.S. Treasury bond?

Question

Quizplus · Accepted Answer

The most important difference between a corporate bond and an equivalent U.S. Treasury bond is that in the case of corporate bonds, firms have sometimes defaulted, whereas the U.S. government has not. This makes corporate bonds riskier than U.S. Treasury bonds. Option A is incorrect because it compares corporate cash flow to U.S. government revenue, which is not the main difference between the two types of bonds. Option B is incorrect because both corporate bonds and U.S. Treasury bonds are traded on various markets, and the trading venue does not affect the characteristics of the bonds themselves. Option D is incorrect because the beta of a bond is a measure of its volatility relative to a market benchmark, and it is not a key difference between corporate bonds and U.S. Treasury bonds.

What Is the Most Important Difference Between a Corporate Bond