- CFA Exams
- CFA Level I Exam
- Topic 1. Quantitative Methods
- Learning Module 1. Rates and Returns
- Subject 1. Interest Rates and Time Value of Money
CFA Practice Question
The yield to maturity on otherwise identical option-free bonds issued by the U.S. Treasury and a large industrial corporation is 6 percent and 8 percent, respectively. If annual inflation is expected to remain steady at 2.5 percent over the life of the bonds, the most likely explanation for the difference in yields is a premium due to ______.
A. maturity
B. default risk
C. inflation
Explanation: The difference is attributed to default risk.
User Contributed Comments 0
You need to log in first to add your comment.