You would expect a bond of the U.S. government and a bond of an Eastern European...

You would expect a bond of the U.S. government and a bond of an Eastern European government to pay different interest rates because of differences in the bonds’ (Credit risk/ tax treatment/ term ).

You would expect a bond that repays the principal in year 2040 to pay (the same/ higher/ lower ) interest rate as compared to a bond that repays the principal in year 2020.

You would expect a bond from a software company you run in your garage and a bond from Coca-Cola to pay different interest rates because of differences in the bonds’ (Credit risk/ tax treatment/ term ).

You would expect a bond issued by the federal government to pay (the same/ higher/ lower ) interest rate as compared to a bond issued by New York State.

Expert Solution

We would expect a bond of the U.S government and a bond of an Eastern European government to pay interest rates because of differences in the bonds credit risk . As the bond of an Eastern European government would pay a higher interest rate than the bond of the U.S government bond because there would be a greater risk of default.

We would expect a bond that repays the principal in year 2040 to pay the higher interest rate as compared to a bond that repays the principal in year 2020.

We would expect a bond from a software company we run in our garage and a bond from Coca-Cola to pay different interest rates because of differences in the bonds credit risk. As a bond from a software company run in the garage would pay a higher interest rate than a bond from Coca-Cola because software company has more credit risk.

We would expect a bond issued by the federal government to pay the higher interest rate as compared to a bond issued by the New York state because an investor does not have to pay federal income tax on the bind from New York state.

Rahul Sunny answered 1 year ago

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