Assume you are looking at the following bonds for purchase: Bond A: 5 year US Treasury Note @ 3.25% YTM Bond B: 10 year US Treasury Note @ 3.50% YTM Bond C: 5 year BBB rated Non-Callable Corporate Bond @ 4.85% YTM Bond D: 10 year AA rated Non-Callable Corporate Bond @ 4.35% YTM Bond E: 10 year Agency Callable in 5 years @ 4.40% YTC | 4.75% YTM The 10 year Callable Agency Bond (Bond E) has a higher YTM than the 10 year AA rated Corporate Bond (Bond D) because the Agency (Bond E) has

a) longer duration (more interest rate risk in rates up).

b) more optionality risk.

c) more credit risk.