Author Question: Assume that interest rates on 30-year Treasury and corporate bonds with different ratings, all of ... (Read 19 times)

Facerro · **on:** Aug 7, 2023

Question 1

Assume that all interest rates in the economy decline from 12% to 11%. Which bond would have the largest percentage increase in price?

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a 25-year zero coupon bond

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a 20-year bond with a 6% coupon

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a 10-year bond with a 12% coupon

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a 7-year bond with a 16% coupon

Question 2

Assume that interest rates on 30-year Treasury and corporate bonds with different ratings, all of which are noncallable, are as follows:


		T-bond = 8.85%		A = 10.50%
		AAA = 9.31%		BBB = 11.64%

What most probably caused the differences in rates among these issues?

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default risk differences

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real risk-free rate differences

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interest rate risk differences

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inflation differences

rika06@comcast.net · **Reply #1 on:** Aug 7, 2023

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