Which factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices a)Inflation rate b)Default risk and maturity risk c)Maturity risk d)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 a)Inflation rate b)Default risk and maturity risk c)Maturity risk d)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
a)Inflation rate
b)Default risk and maturity risk
c)Maturity risk
d)Default risk
Expert Solution
Step 1 Given Information
T Bill is a short term government debt obligation backed by the Treasury Department with a maturity of one year or less. Interest is at fixed rate.
Corporate Bond is a type of debt security that is issued by a firm and sold to investors.
The company gets the capital it needs and in return the investor is paid a pre-established number of interest payments at either a fixed or variable interest rate.
Since question specific says short term corporate bonds.
So, assuming both t bills and short term corporate bonds hv same maturity date
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