Question

9. Select the right answer below. • The difference between the 10-year Treasury bond yield and the 1-year Treasury bond yield gives us the __________________(1) premium. • The difference between the 10-year General Motors bond yield and the 10-year Treasury bond yield gives us the __________________(2)premium.

• The difference between the yields of a CCC-rated corporate bond and an AAA-rated corporate bond, both of 10-year maturity, and both of companies of the same size, and in the same industry, gives us the ____________________(3)premium

• The difference between the Amazon stock expected return and the Amazon 10-year corporate bond gives us a good approximation of the _____________________ (4)premium.

• The premium that arises as a result of time, i.e. impatience, or inflation, or just low willingness to wait is called the ____________________ (5)premium.

• The premium that reflects the probability that a company/individual/project/organization might go bankrupt or not be able to make payment in full is called the ______________________ (6) premium.

• The premium that reflects the extra compensation to make the risk-averse consumer to take on risk is called the ______________________(7) premium.

a. (1)DEFAULT; (2)TERM; (3)DEFAULT; (4)RISK; (5)TERM; (6)DEFAULT; (7)RISK

b. (1)TERM; (2)DEFAULT; (3)DEFAULT; (4)RISK; (5)TERM; (6)DEFAULT; (7)RISK

c. (1)RISK; (2)TERM; (3)DEFAULT; (4)TERM; (5)DEFAULT; (6) RISK; (7)RISK

d. (1)EXPECTED; (2)PROMISED; (3)RISK; (4)TERM; (5)TERM; (6)DEFAULT; (7) RISK

Answer 1

We see that the solution is

1.
Term
2.
Default
3.
Default
4.
Risk
5.
Term
6.
Default
7.
Risk