Decrease in the price of a corporate bond

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Reference no: EM131500192

1. A 20 year general obligation bond issued by Wyoming has a yield to maturity of 2.75% while the yield to maturity of 20-year U.S. Treasury bonds is 3.15%. Which of the following explanations is most likely to explain the difference in yields?

A: The Wyoming bond is exempt from federal income taxes.

B: The Wyoming bond has a shorter maturtiy.

C: The ranching-based economy of Wyoming makes those bonds less likely to default.

D: Wyoming has a lower default risk than the federal government.

2. Which one of the following would be most likely to trigger a decrease in the price of a corporate bond issued by Kroger Stores?

A: An increase in the overall rate of inflation in the U.S.

B: An increase in Kroger's average cost of goods sold.

C: An announcement by Whole Foods Stores that the company was exiting the grocery store market because the competition was too strong.

D: A decline in the average default risk premium for US corporations.

Reference no: EM131500192

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