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Author Question: If we want to get some idea about a default premium over time between two specific assets, we can ... (Read 78 times)

bclement10

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on: Jul 10, 2018
If we want to get some idea about a default premium over time between two specific assets, we can compare the returns on short-term or medium-term bonds with those on large company stocks.
 
  Indicate whether the statement is true or false.

Question 2

Which of the four interest rate components had the greatest average percentage in the period from 1950-1999?
 
  A) Real rate
  B) Inflation premium
  C) Historical interest rates
  D) Default premium


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HandsomeMarc

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: FALSE
Explanation: If we want to get some idea about a default premium over time between two specific assets, we can compare the returns with top-rated corporate bonds and U.S. government bonds.

Answer to Question 2

Answer: B
Explanation: B) For the 50-year period from 1950-1999, inflation averaged 4.05, the real rate averaged 1.18, the maturity premium averaged 1.28 (for twenty-year maturity differences), and the default premium averaged 0.49 (for AAA over government bonds).


bclement10

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Reply 2 on: Jul 10, 2018
YES! Correct, THANKS for helping me on my review

bigsis44

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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