Which of the following financial market securities would probably pay the highest interest rate ?
Correct answer: A. A bond issued by a startup company
- A. A bond issued by a startup company
- B. A government bond issued by the government of France.
- C. A bond issued by a blue-chip company
- D. An investment funds with portfolio of corporate bonds issued by blue chip companies
Explanation
A startup normally has greater default risk than a government or established blue-chip borrower, so its bond must offer the highest interest rate as compensation. The other securities involve comparatively safer borrowers or diversified portfolios.
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