In many respects, the bond market appears to demonstrate a high degree of rationality of risk and return.

Question

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In many respects, the bond market appears to demonstrate a high degree of rationality in recognition of risk and return. Corporate issues promise a higher yield than government issues to compensate for risk; and furthermore, federally-sponsored credit agencies pay a higher return than Treasury issues for the same reason. Also, lower rated bonds consistently trade at larger yields than higher-quality bonds to provide a risk premium.

In Many Respects, the Bond Market Appears to Demonstrate a High