Suppose a aaa-rated company (which is the highest bond rating a firm can have) had bonds with the same maturities as the treasury bonds. estimate what you believe a aaa-rated company's yield curve would look like on the same graph with the treasury bond yield curve. (hint: think about the default risk premium on its long-term versus its short-term bonds.)
the yield risk curve for the aaa-rated corporate bonds will
the yield curve for the treasury securities.
what will be the approximate yield curve of a much riskier lower-rated company with a much higher risk of defaulting on its bonds?
the yield risk curve of a much riskier lower-rated company will be
the yield curve for the treasury securities and yield curve for the aaa-rated corporate bonds.
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