Question

Using the following data on bond yields: This Year Last Year Yield on top-rated corporate bonds 4.9 % 7.9 % Yield on intermediate-grade corporate bonds 6.9 % 9.9 % a. Calculate the confidence index this year and last year. (Round your answers to 4 decimal places.)

Answer 1

Answer and Explanation:

The computation of the confidence index this year and last year is shown below:

As we know that

Confidence index is

= Yield on top-rated corporate bonds ÷ Yield on intermediate-grade corporate bonds

For This year, it is

= 4.9% ÷ 6.9%

= 0.710

And, for the Last Year, it is

= 7.9% ÷ 9.9%

= 0.7979

We simply applied the above formula