Essay
-Consider Figure 14.5 which shows the ten-year bond yield (line with diamonds)and the yield on BAA corporate bonds (line),to answer the following questions.
a.What is the difference between the two yields referred to? Explain.
b.What caused the sharp divergence between these two yields in late 2008? Explain.
c.Explain the dynamics of the decline in 10-year bond yield and the increases in the BAA bond yield during that time.
Correct Answer:
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a.It is the risk premium,or spread, 
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Correct Answer:
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