The same, higher or lower Term, tax treatment, credit risk A higher, a lower, th

Question

The same, higher or lower Term, tax treatment, credit risk A higher, a lower, the same Tax treatment, term credit risk Attempts: Average: /4 1. Problems and Applications Q1 interest rate as You would expect a bond of the U.S. government to pay compared to a bond of an Eastern European government. You would expect a bond that repays the principal in year 2040 and a bond that repays the principal in year 2020 to pay different interest rates because of differences in the bonds' You would expect a bond of a software company you run in your garage to pay interest rate as compared to a bond issued by Coca-Cola. You would expect a bond issued by the federal government and a bond issued by New York State to pay different interest rate because of differences in the bonds Grade It Now Save &Continue; Continue without saving opyright Notices Terms of UsePrivacy Notice Security Notice Accessibility

Explanation / Answer

a) A government with a higher risk will pay the higher interest rate for their bonds. The eastern European nations will pay higher interest rates and the US government interest will be lower.

b) There is a difference in "Terms of the bonds".

c) Bond for a garage company will pay a higher interest rate. (higher the risk factor higher the interest rate will be.)

d) "Tax treatment".

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