Why should I choose AnalystNotes?
Simply put: AnalystNotes offers the best value and the best product available to help you pass your exams.
Basic Question 2 of 12
The yield on a default-free bond is composed of ______.
II. expected inflation rate
III. maturity premium
IV. liquidity premium
V. credit spread
I. risk-free interest rate
II. expected inflation rate
III. maturity premium
IV. liquidity premium
V. credit spread
User Contributed Comments 3
| User | Comment |
|---|---|
| CJPerugini | Why wouldn't you include liquidity premium? Just because a bond is default free doesn't mean it's 100% liquid. |
| ascruggs92 | Actually, it does. Think about it logically, there will always be buyers for a risk free asset, and no seller would reduce the price of a risk free asset unless the sale was forced, that would be giving away guaranteed income. Also, understand that any time risk free anything is being discussed, it is always in reference to US Treasuries, and there is no shortage of liquidity in that market. |
| houstcarr | there is major shortage of liquidity in plenty of us treasuries. this has been a major discussion in markets for the past few years. |
I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
describe macroeconomic, market, and issuer-specific factors that influence the level and volatility of yield spreads
CFA® 2024 Level I Curriculum, Volume 4, Module 14.