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A 10-year Treasury note has a yield of 2.71 percent, and a Baa (BBB) corporate bond...

A 10-year Treasury note has a yield of 2.71 percent, and a Baa (BBB) corporate bond with comparable maturity has a yield of 4.93 percent. The difference in yields owes to:

a. Differences in credit risk

b. Differences in liquidity

c. Expected inflation

d. Both a and b

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Answer #1

ANSWER : d : BOTH a & b (THUMBS UP PLEASE)

TREASURY NOTE ARE HAVING LOWER CREDIT RISK THAN BBB RATES CORPORATE BONDS AS TREASURY NOTES HAVE GOVERNMENT BACKING. SECONDLY, DUE TO SAME REASON, THERE ARE NO LIQUIDITY ISSUES WITH TREASURY NOTES.

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