Which of the possible bonds listed below best satisfies your uncle’s criteria
-Your uncle would like to restrict his interest rate risk and his default risk, but he still would like to invest in corporate bonds. Which of the possible bonds listed below best satisfies your uncle’s criteria?
AAA bond with 10 years to maturity.
BBB perpetual bond.
BBB bond with 10 years to maturity.
AAA bond with 5 years to maturity.
-If the yield curve is downward sloping, what is the yield to maturity on a 10-year Treasury coupon bond, relative to that on a 1-year T-bond?
The yield on the 10-year bond is less than the yield on a 1-year bond.
The yield on a 10-year bond will always be higher than the yield on a 1-year bond because of maturity premiums.
It is impossible to tell without knowing the coupon rates of the bonds.
The yields on the two bonds are equal.
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