Assume that interest rates on 20-year Treasury and corporate bonds with different ratings,all of which are noncallable,are as follows:What most probably caused the differences in rates among these issues?
$\begin{array}{llcc}
\text { T-bond =7.72 \% } & \text { A=9.64 \% } \
\text { AAA=8.72 \% } &\text { BBB=10.18 \% }
\end{array}$

Question

Assume that interest rates on 20-year Treasury and corporate bonds with different ratings,all of which are noncallable,are as follows:What most probably caused the differences in rates among these issues? 
$\begin{array}{llcc}
  \text { T-bond =7.72 \% } & \text {    A=9.64 \%   }  \
 \text {  AAA=8.72 \%   } &\text {  BBB=10.18 \%    } 
\end{array}$

Quizplus · Accepted Answer

The differences in rates among these issues are most likely due to default risk differences. Treasury bonds are considered risk-free in terms of default, while corporate bonds (A, AAA, BBB) carry higher default risks, which are reflected in their higher interest rates.

Assume That Interest Rates on 20-Year Treasury and Corporate Bonds T-bond =7.72 % A=9.64 % AAA=8.72 % BBB=10.18 % \begin{array}{llcc} \text { T-bond =7.72 \% } & \text { A=9.64 \% } \\ \text { AAA=8.72 \% } &\text { BBB=10.18 \% } \end{array} T-bond =7.72 % AAA=8.72 % ​ A=9.64 % BBB=10.18 % ​

Assume That Interest Rates on 20-Year Treasury and Corporate Bonds $\begin{array}{llcc} \text { T-bond =7.72 \% } & \text { A=9.64 \% } \\ \text { AAA=8.72 \% } &\text { BBB=10.18 \% } \end{array}$