Question
Two different companies of approximately similar financial strength and with similar management teams both have 30-year bonds that trade in active secondary markets. Nile Company
Two different companies of approximately similar financial strength and with similar management teams both have 30-year bonds that trade in active secondary markets. Nile Company is located in a country with relatively small increases in overall price levels; its bonds have a 4% return. Amazon Company is located in a country with relatively large increases in overall price levels each year; its bonds have a 14% return. What is the difference in the interest rate between Nile Companys bonds and Amazon Companys bonds called?
| A) Default risk premium | |
| B) Inflation premium | |
| C) Liquidity premium | |
| D) Maturity risk premium |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started