rted: Jun 13 at 4:42pm uiz Instructions lect the best response for each question

Question

rted: Jun 13 at 4:42pm uiz Instructions lect the best response for each question. Question 5 5 pts The yield on a 10-year US Treasury bond is 2.5%. ABC Co. and XYZ Co. each issue a 10-year bond. ABC's bond has a yield of 3.5%, while XYZ's bond has a yield of 5%. Select the statement below that BEST describes this situation. O The credit spread of ABC's bond is 1%. XYZ Co. should have greater default risk than ABC Co. The credit spread of XYZ's bond is 5%. XYZ Co. should have a higher credit rating than ABC Co. O The credit spread of ABC's bond is 1%; and XYZ Co. should have greater default risk than ABC Co., Next Quiz saved at 4:55pm Submit Quiz

Explanation / Answer

Statements 1 2 and 5 are correct

Credit spread of ABC is 3.5 - 2.5 = 1%

XYZ have greater default risk, as validated by greater risk premium attached with XYZ

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