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1) Why may the discount rates differ between two countries government bonds. Year Bond U.S. Bond Discount Rate Canadian Bond Discount Rate 2 0.0042 0.0031

1) Why may the discount rates differ between two countries government bonds.

Year Bond

U.S. Bond Discount Rate

Canadian Bond Discount Rate

2

0.0042

0.0031

5

0.0116

0.0102

10

0.0182

0.0191

20

0.0231

0.0241

  • What economic forces contribute to the differences in discount rate?
  • Explain why the discount rate on the 2 and 5-year U.S. Bonds is higher than Canadian Bond.
  • Explain why the discount rate on the 10 and 20-year Canadian Bond is higher than American Bond.

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