The Wall Street Journal contained a table showing yield comparisons for groups of corporate bonds. The following data have been adapted from the table:
|
Yield |
Percentage |
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|
As of |
52-week |
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|
28-Apr |
27-Apr |
High |
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|
Risk category |
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|
1-10 year maturities: |
Low |
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|
High quality |
7.08% |
6.94% |
7.16% |
5.32% |
|
Medium quality |
7.41 |
7.26 |
7.49 |
5.76 |
|
Over 10 year maturities: |
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|
High quality |
7.91 |
7.81 |
8.06 |
6.93 |
|
Medium quality |
8.36 |
8.25 |
8.49 |
7.29 |
|
High-yield bonds |
10.45 |
10.48 |
10.53 |
9.25 |
|
Standard & Poor”s |
|
|
ratings were: |
|
|
High quality |
AAA to AA |
|
Medium quality |
A to BBB |
|
High yield |
BB to C |
Prepare written answers to the following questions.
a. In each column of numbers, why do the yield rates increase from top to bottom?
b. For the high quality and medium quality bonds, what could account for the increase in the yield rates from 4/27 to 4/28? Take into consideration possible economic events.
c. Which risk class of bonds was closest to its 52-week high on 4/28? What could have been the cause?