A Treasury Bond Due in 1 Year Has a Yield

A Treasury bond due in 1 year has a yield of 6.3%, while a Treasury bond due in 5 years has a yield of 8.8%. A bond due in 5 years issued by High Country Marketing Corp. has a yield of 9.6%, while a bond due in 1 year issued by High Country Marketing Corp. has a yield of 6.8%. The default risk premiums on the 1-year and 5-year bonds issued by High Country Marketing Corp. are, respectively, ________ and ________.

A) .4%; .3%
B) .4%; .5%
C) .5%; .5%
D) .5%; .8%

Correct Answer:

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