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Amol Srivastava
Amol Srivastava, Accountant
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Assume that interest rates on 20-year Treasury and corporate

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Assume that interest rates on 20-year Treasury and corporate bonds are as follows:
T-bond = 7.72%        A   = 9.64%
AAA    = 8.72%        BBB = 10.18%
The differences in rates among these issues were caused primarily by
The differences in rates among these issues were caused primarily by the credit risk and payment risk faced by these three securities. T-Bonds are treasury bonds so they have federal backing and hence are considered to be almost risk free and hence have the lowest interest rate. BBB bond has higher interest rate than AAA or A because BBB is a lower bonf rating than AAA and A and thus are considered riskier. The same explanation holds good for difference in AAA and A interest rates also.

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