Two bonds have the same term to maturity.The first was issued by a government and the probability of default is believed to be low.The other was issued by a corporation and the probability of default is believed to be high.Which of the following is correct?
A) Because they have the same term to maturity the interest rates should be the same.
B) Because of the differences in tax treatment and credit risk,the state bond should have the higher interest rate.
C) Because of the differences in tax treatment and credit risk,the corporate bond should have the higher interest rate.
D) It is not possible to say if one bond has a higher interest rate than the other.
Correct Answer:
Verified
Q2: You observe a closed economy that has
Q5: The primary economic function of the financial
Q10: Which of the following statements about the
Q15: The fact that borrowers sometimes default on
Q33: Which of the following is correct?
A)Lenders sell
Q56: The sale of stocks
A)and bonds to raise
Q91: A stock index is
A)an average of a
Q96: Compared to stocks,bonds offer the holder
A)lower risk
Q131: We associate the term debt finance with
A)the
Q177: Which of the following would both make
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents