Can somebody explain Comments 2 & 3?
Share
Please briefly explain why you feel this question should be reported.
Please briefly explain why you feel this answer should be reported.
Please briefly explain why you feel this user should be reported.
Comment 3 talks about the components of credit spread.
Credit spread calculated as the difference between the yield of a government bond and a corporate bond not only incorporates credit risk but also liquidity risk and tax impact.
This is because the yield on a corporate issue may be higher to compensate for the lower liquidity of the corporate bonds compared to government bonds and also unfavourable taxation. However, the credit risk is the most significant component of the spread.
Hope this helps!