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c)
The demand of corporation's bonds will increase significantly because of federal government's guarantee. Bonds become more secure and a risk free investment as the government guarantees to pay creditors if the corporation goes bankrupt in the future. As the demand for corporation bonds increase , there will likely be a decrease in interest rate on corporation bonds.
On the assumption that the interest on treasury securities are lesser than corporate bonds , the decrease in interest rate of corporation bonds would result in an increase in interest rates on treasury securities.This will bring an equilibrium in the case of 2 risk involved securities.
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c) Predict what will happen to interest rates on a corporation's bonds if the federal government...
QUESTION 2: 4 POINTS Suppose initially, the interest rate on U.S. Treasury bonds is equal to...
QUESTION 2: 4 POINTS Suppose initially, the interest rate on U.S. Treasury bonds is equal to that on bonds issued by Greek government. In 2010 and 2011, the government of Greece risked defaulting on its bonds due to a severe budget crisis. (1) Using bond market graphs, graphically show the effects on U.S. Treasury bonds and comparable-maturity Greek bonds. (2 points) Greek government bonds U.S. Treasury bonds (2) What is the impact on prices and interest rates of Greek bonds...
Predict what will happen to interest rates under different scenario in the following the public suddenly...
Predict what will happen to interest rates under different scenario in the following the public suddenly expects a large increase in stock prices. a large federal deficit is expected in the coming year the fed guarantees that it will pay creditors if the corporation goes bankrupt in the future. What will happen to the interest rates on Treasury securities? Inflation is expected to increase in 2018
What would happen to the risk premiums of municipal bonds if the federal government guarantees today...
What would happen to the risk premiums of municipal bonds if the federal government guarantees today that it will pay creditors if municipal governments default on their payments O A. Risk premium on municipal bonds will decrease O B. Risk premium on municipal bonds will stay the same. OC. Risk premium on municipal bonds will increase. OD. There is not enough information to tell. Do you think that it will then make sense for municipal bonds to be exempt from...
1- If the income tax exemption on municipal bonds were abolished, show what would happen to...
1- If the income tax exemption on municipal bonds were abolished, show what would happen to the interest rates on these bonds. Show and explain the effects would the change have on interest rates on U.S. Treasury securities?(draw graphs) 2-Suppose you are in charge of the financial department of your company and you have to decide whether to borrow short or long term. Checking the news, you realize that the government is about to engage in a major infrastructure plan...
just the answers please Review View Help Search 9. The spread between the interest rates on...
just the answers please
Review View Help Search 9. The spread between the interest rates on bonds with default risk and default-free bonds is called the A) bond margin B) junk margin. C) risk premium. D) default premium. 10. If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will and the expected return on these bonds will everything else held constant. A) decrease, increase B) decrease; decrease...
When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect interest rates...
When the Federal Reserve purchases government treasury bonds from commercial banks, we can expect interest rates in the economy to _______. As a result, spending by firms and households is likely to _______.
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______...
1) For U.S. Treasury bonds, what type of risk exists when rates are historically low? _______ A) Gap risk B) Interest-rate risk C) Default risk D) Reinvestment risk 2) Which of the following institutions assign ratings for bonds in the United States? _______ A) The Securities and Exchange Commission B) The Federal Reserve District Banks C) The U.S. Treasury D) Private companies such as Moody’s and Fitch 3) If the three-month Treasury bill yields 3.1% while the yield on a...
You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify th...
You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Type of Bond Description These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets. These bonds...
Use the marginal income tax rates shown here to calculate the average tax rate on an...
Use the marginal income tax rates shown here to calculate the
average tax rate on an income of $100,000.
Taxable Income
Tax rate
$0–$8,700
10%
$8,700–$35,350
15%
$35,350–$85,650
25%
$85,650–$178,650
28%
$178,650–$388,350
33%
Over $388,350
35%
Average tax rate on $100,000 of income is ____________.
21.46%
24.27%
28.00%
10.5 points
QUESTION 2
Use the marginal income tax rates shown here to calculate the
average tax rate on an income of $200,000.
Taxable Income
Tax rate
$0–$8,700
10%
$8,700–$35,350
15%...
As the junior analyst for an investment management firm, you have been assigned to prepare a presentation for clients regarding the term structure of interest rates. Because the shape of the term structure of interest rates is often used to predict future
As the junior analyst for an investment management firm, you have been assigned to prepare a presentation for clients regarding the term structure of interest rates. Because the shape of the term structure of interest rates is often used to predict future macroeconomic conditions as wells as the course of future short-term interest rates, your presentation will consist of the following:-Plot the yield curve for each year between 2006 – 2020 and display these data on one graph.-For each year...
QUESTION 2: 4 POINTS Suppose initially, the interest rate on U.S. Treasury bonds is equal to that on bonds issued by Greek government. In 2010 and 2011, the government of Greece risked defaulting on its bonds due to a severe budget crisis. (1) Using bond market graphs, graphically show the effects on U.S. Treasury bonds and comparable-maturity Greek bonds. (2 points) Greek government bonds U.S. Treasury bonds (2) What is the impact on prices and interest rates of Greek bonds...
What would happen to the risk premiums of municipal bonds if the federal government guarantees today that it will pay creditors if municipal governments default on their payments O A. Risk premium on municipal bonds will decrease O B. Risk premium on municipal bonds will stay the same. OC. Risk premium on municipal bonds will increase. OD. There is not enough information to tell. Do you think that it will then make sense for municipal bonds to be exempt from...
just the answers please
Review View Help Search 9. The spread between the interest rates on bonds with default risk and default-free bonds is called the A) bond margin B) junk margin. C) risk premium. D) default premium. 10. If the probability of a bond default increases because corporations begin to suffer large losses, then the default risk on corporate bonds will and the expected return on these bonds will everything else held constant. A) decrease, increase B) decrease; decrease...
You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Type of Bond Description These bonds are backed by real estate holdings and equipment, and if a company goes bankrupt, the collateral can be sold off to compensate for the default. These bonds, more so than other collateralized securities, have prior claims over assets. These bonds...
Use the marginal income tax rates shown here to calculate the
average tax rate on an income of $100,000.
Taxable Income
Tax rate
$0–$8,700
10%
$8,700–$35,350
15%
$35,350–$85,650
25%
$85,650–$178,650
28%
$178,650–$388,350
33%
Over $388,350
35%
Average tax rate on $100,000 of income is ____________.
21.46%
24.27%
28.00%
10.5 points
QUESTION 2
Use the marginal income tax rates shown here to calculate the
average tax rate on an income of $200,000.
Taxable Income
Tax rate
$0–$8,700
10%
$8,700–$35,350
15%...
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