Assume that interest rates on 20-year Treasury and corporate bonds are as follows: T-bond = 7.72% AAA = 8.72% A = 9.64% BBB = 10.18% The differences…

Assume that interest rates on 20-year Treasury and corporate bonds are as follows:

T-bond = 7.72%        AAA = 8.72%        A = 9.64%           BBB = 10.18%

The differences in these rates were probably caused primarily by:

a. Tax effects.

b. Default risk differences.

c. Maturity risk differences.

d. Inflation differences.

e. Real risk-free rate differences

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