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Question
Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings are as follows:T-bond = 7.72% A = 9.64%
AAA = 8.72% BBB = 10.18%
The differences in rates among these issues were most probably caused primarily by:
a. Tax effects.
b. Default risk differences.
c. Maturity risk differences.
d. Inflation differences.
e. Real risk-free rate differences.
Answer
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