Company XYZ issues two one-year bonds at the same time. Bond A is rated AAA grade while Bond B is B+ grade. The most likely risk premium between the two bonds is:
maturity risk premium
default risk premium
C is correct.
AAA grade and B+ grade is the credit rating of the bonds. A bond with triple A grade is high quality bond, and a bond with B+ grade is high yield bond (or junk bond). Bond A and Bond B are similar except for the credit rating. Therefore, the most likely risk premium in this question is default risk premium.
這2個債券既然都是company xyz （同一公司）同時間發行、相同期限的債券，為何default risk 還會有差異呢？