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Suppose the yield to maturity on bonds issued by firm A is 2% and the yield to maturity on bonds issued by firm Bis 5%.
Suppose the yield to maturity on bonds issued by firm A is 2% and the yield to maturity on bonds issued by firm Bis 5%. All the others are the same (e.G. same promised coupon payments, same coupon payment frequency, same maturity, and the same face value). Which bonds do investors believe is more likely to default? Which bonds sell cheaper. A-A is more likely to default; A sells cheaper B- A is more likely to default; B sells cheaper C- B is more likely to default; B sells cheaper D- B is more likely to default; A sells cheaper
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