Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices Inflation rate Maturity risk Default risk and maturity risk Default risk
Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices Inflation rate Maturity risk Default risk and maturity risk Default risk
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond?
Group of answer choices
Inflation rate
Maturity risk
Default risk and maturity risk
Default risk
Expert Solution
Step 1
The T-bill is the debt instrument used by the government to raise capital. It has a maturity of one year or less and is backed by the Treasury Department, which is why they are considered risk-free instruments.
The short-term corporate bond is a debt instrument provided by private companies to raise capital. They have a maturity ranging from one year to three years. They are considered riskier as they are backed by the assets of the companies.
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