Which of the following factors could explain difference in yields on bonds with the same time to maturity?

Select one:

a.default risk

b.tax considerations

c.liquidity

d.all of the above

The recent increase in U.S. government debt could lead to a(n) _____ in yields due to an increase in

Select one:

a.increase; default risk.

b.decrease; default risk.

c.increase; liquidity.

d.decrease; liquidity.

If yields on one-year bonds are expected to fall and the liquidity premium increases with the time to maturity, the yield curve will be

Select one:

a.upward sloping.

b.flat.

c.downward sloping.

d.cannot be determined.

The yield on a one-year bond is currently 4% and the expected yield on one-year bonds for the next two years is 5% and 6%. If the liquidity premium is 0.5%, what is the yield on a bond with two years to maturity?

Select one:

a.4.5%

b.5%

c.5.5%

d.6%