Question

The term structure of interest rates is upward sloping for all bond types. A certain AAA-rated non-callable 10-year corporate bond has been issued at a 6.15 percent promised yield. Which one of the following bonds probably has a higher promised yield? A) A non-callable AAA-rated corporate bond with a five-year maturity B) A callable AAA-rated corporate bond with a 15-year maturity C) A non-callable AAA-rated convertible corporate bond with a 10-year maturity D) A similar quality municipal bond E) All of these choices are correct.

Answer 1

B) A callable AAA-rated corporate bond with a 15-year maturity

Step-by-step explanation:

Base on the scenario been described in the question, a non- callable 10-years corporate bond has been issued at a 6.15 percent promised yield the bond which has higher promised yield will be a callable AAA-rated corporate bond with a 15-year maturity period. This is so because, it has a higher promised yield .