Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows: The differences in rates among these issues were most probably caused primarily by:

Question

Quizplus · Accepted Answer

The differences in rates among the Treasury and corporate bonds with different ratings are primarily caused by default risk differences. Corporate bonds have a higher default risk compared to Treasury bonds issued by the government, hence they offer a higher yield to compensate for the risk. The other options listed may also have an impact on interest rates, but they are not the primary drivers of differences in rates among different types of bonds.

Assume That Interest Rates on 15-Year Noncallable Treasury and Corporate