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July 30, 2014

Homework Help: economics

Posted by Jaye on Tuesday, October 26, 2010 at 2:19pm.

1. Consider the following four debt securities, which are identical in every characteristic except as noted:

W: A corporate bond rated AAA

X: A corporate bond rate BBB

Y: A corporate bond rated AAA with a shorter time to maturity than bonds W and X

Z: A corporate bond rated AAA with the same time to maturity as bond Y that trades in a more liquid market than bonds W, X, or Y.

List the bonds in the most likely order of the interest rates (yields to maturity) of the bonds from highest to lowest. Explain your work.

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