management question 7 A Moving to another question will save this response. Ques

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management question 7

A Moving to another question will save this response. Question 7 The interest rates on corporate and on 5-year Treasury bonds are as follows (all corporate bonds are also 5-year securities) T-Bond 5.44% AA 6.00% A 6.3%. BB 6.69% As you can see, the bonds above offer different interest rates. the differences were caused by what? o A. Liquidity and default risk differences o B. Inflation differences o C. World Market Investment (WMI) differences O D.Stagnation differences o E. r differences

Explanation / Answer

The correct answer is option A.

Liquidity and default risk differences will cause the change in the interest rates of corporate bonds.

Different bonds have different liquidity and different risks and thus, generally are the major cause for the purpose of change in interest rates of corporate bonds.

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