Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows:
T-bond = 7.72%
A = 9.64%
AAA = 8.72%
BBB = 10.18%
The differences in rates among these issues were most probably caused primarily by:
Answer
A. Real risk-free rate differences.
B. Tax effects.
C. Default risk differences.
D. Maturity risk differences.
E. Inflation differences.