Assume that interest rates on 20-year Treasury and followa: on 20-year Treasury and corporate bonds are as T-bond . 7.72 AAA 8.72 A 9.64 BBB 10.18 The differences in rates among these issues were caused primarily by a. Tax effects. b. Default risk differences c. Maturity risk differences. d. Inflation differences e. Real risk-free rate differences. 2. The real risk-free rate, r, is 3 percent. Inflation is expected o Assume that there 7-year corporate bond has a yield of average 2 percent a year for the next three years, after which time inflation is expected to average 3.5 percent a year. is no maturity risk premium. A 7.6 percent. Assume that the liquidity premium on the corporate bond is 0.4 percent. What is the default riek premium on the corporate bond? a. 0.70 1.34 1.45% 2.01% c) e. 2.20 rving 23 The primary operating goal of a publicly-owned firm interested in se 23. it 23. The its stockholders should be t a. Maintain steady growth in both sales and net income b. Maximize its expected EPS. c. Minimize the chances of losses. d. Maximize its expected total corporate income. e. Maximize the stock price per share over the long run. over the years, O'Brien Corporation's stockholders have provided $20,000, 000 of capital, when they purchased new issues of stock and allowed management to retain some of the firm's earnings. The firm now has 1,000,000 shares of common stock outstanding, and it sells at a pri of $38.50 per share. How much value has O'Brien's management added to stockholder wealth over the years? 24. a. $18,500,000 b. $19,000,000 c. $19,500,000 d. $20, 000,000 e. $20,500,000