Assume that interest rates on 15-year noncallable Treasury and corporate bonds with different ratings 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. Tax effects.
B. Default risk differences.
C. Maturity risk differences.
D. Inflation differences.
E. Real risk-free rate differences.
Answer: B
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