Chapter 2 (Pinches) “Financial Systems, Interest Rates
Risk Premium (RP) - bond issuer may not be able to pay principal + interest ( default premium ( Bond ratings: AAA – best ( C or less for default ( ( Quality of bond ( ( rating ( lower is i. T-bill yields represent risk free rate ( yield on corporate bond of same maturity - yield on T-bill = default premium (dp) ................
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