Assume that interest rates on 20-year Treasury and corporate bonds with different ratings, all of which are noncallable, 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. Real risk-free rate differences.
B. Tax effects.
C. Default risk and liquidity differences.
D. Maturity risk differences.
E. Inflation differences.
Answer: C
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