Investments in U.S. Treasury bonds have limited upside since the government is only required to pay...
Investments in U.S. Treasury bonds have limited upside since the government is only required to pay interest on the principal it borrowed plus the bond principal when the security matures. Investments in common stocks of companies listed on the NASDAQ and NYSE have no upside limits
Homework Answers
The US Treasury bonds have limited upside upto the cost of issuing bonds ie. Interest plus principal. The bonds which are being purchased by the investor knows in advance the return on the investment he/she is going to have. The Treasury bonds are the fixed income, but the main advantage is that these bonds are safe and risk-free ie. there does not exist any maturity and interest risk. So, if the upside is limited to the principal plus interest but it recovery is secured in the worst economic conditions.
On the other hand, the common stocks of the companies in the secondary market like Nasdaq and NYSE have no upside limits but they are the most risky investment assets because there downside is also having no limit. The stocks could be zero in the worst time. The stocks are having risk of return and maturity (as upside is not secure).
Thus, the investment in the T-bonds or Stocks will depend on the risk resistance of the investors.
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Investments in U.S. Treasury bonds have limited upside since the
government is only required to pay...
A BBB-rated corporate bond has a yield to maturity of 11.8%. A U.S. Treasury security has a yield to maturity of 10.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 11.0% and have five
A BBB-rated corporate bond has a yield to maturity of 11.8%. A U.S. Treasury security has a yield to maturity of 10.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 11.0% and have five years to maturity. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? c. What is the credit...
Dropdown on 1st description: state and local government bonds, us treasury notes, us treasury bills 2nd:bankers...
Dropdown on 1st description: state and local government bonds,
us treasury notes, us treasury bills
2nd:bankers acceptances, commercial papers, money market mutual
funds
3rd: eurodollar time deposits, consumer credit, money market
mutual funds
4th: common stocks, preferred stocks, corporate bonds
3. Financial instruments Aa Aa Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These inancial instruments can...
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1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To...
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questions 1-4 please 1. Why do callable bonds usually pay a higher coupon rate than noncallable...
questions 1-4 please
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Dropdown on 1st description: state and local government bonds,
us treasury notes, us treasury bills
2nd:bankers acceptances, commercial papers, money market mutual
funds
3rd: eurodollar time deposits, consumer credit, money market
mutual funds
4th: common stocks, preferred stocks, corporate bonds
3. Financial instruments Aa Aa Financial instruments are assets that have a monetary value or record a monetary transaction. To coordinate the exchange of capital between borrowers and lenders, financial instruments trade in the financial markets. These inancial instruments can...
1) Present value calculations: A) are appropriate for investments in the same time period B) are accurate only in a low-rate environment C) provide comparisons for investments when inflation is known D) provide a common reference for measuring investments at different maturities 2) Compounding refers to: A) the calculation of interest rates after allowing for the effect of taxes B) the process of earning interest on interest of an investment C) the repayment of both interest and principal at the...
14 Over the last one hundred years a. long term government bonds have outperformed large company stocks b long term government bonds have outperformed Treasury bills c interest income plus operating income d Inflation has been higher than long-term government bonds 15 Let's say a company's stock price falls significanlty immediatley after reports of dissapointing sales during the period are announced. This best describes a. strong form market efficiency b weak form market efficiency c neutral form efficient d volatile...
Term Answer Description Zero coupon bond This term is used for bonds that are secured by a specific asset that the bond issuer owns. Equipment Trust Certificate This type of municipal bond is backed by the full faith and credit of the issuing municipality. The coupon payments are likely to paid by the taxes that the municipality collects. Sinking Fund This is a bond provision that specifies the annual repayment schedule that will be used to service the bond and...
1. Why do callable bonds usually pay a higher coupon rate than noncallable bonds? A. To compensate investors for their extra tax liability B. Because callable bonds have greater default risk than noncallable C. To compensate investors who might suffer a loss as a result of their bonds being called D. To comply with SEC regulations E. None of the above 2. You own a convertible bond issued by MJ9 Corporation that can be exchanged for 60 shares of the...
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