Question

Given the following data on bond yields:

This Year Last Year
Yield on top-rated corporate bonds 9.3% 9.8%
Yield on intermediate-grade corporate bonds 11.8 11.3


a. Calculate the confidence index this year and last year. (Round your answers to 4 decimal places.)

Confidence Index
This Year
Last Year

b. Is the confidence index increasing or decreasing?

Increasing
Decreasing

Answer 1

Step-by-step explanation:

a) Confidence index=Yield on top-rated corporate bonds/ Yield on intermediate-grade corporate bonds

This year=9.3%/11.8%=0.788

Last Year=9.8%/11.3%=0.8673

b) From the calculations we can see that confidence index is decreasing from 0.8673 to 0.788.