Question

Use the information provided to answer the following question.

Security                                     Yield

Expected change in the CPI   2.50%

30-day T-bill 3.50%

10-year T-bond   5.50%

10-year AAA corporate bond   7.40%

5-year BB corporate bond   8.10%

10-year BB corporate bond 8.40%

15 year BB corporate bond   8.60%

10-year B corporate bond   9.40%

30-year BBB corporate bond 9.10%

corporate stocks (S & P 500)   13.50%

The premium paid on Treasury bonds due to additional maturity was _______.

Group of answer choices

0.9%

1.0%

2.0%

3.0%

Answer 1

It's 2%

The additional premium=10 year treasury bond -30 day T bill

=5.5%-3.5%

=2%