As a bond investor, if you expect a slowdown in the economy over the next 12 months, what would be your investment strategy?
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Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions : Discuss which bond will trade at a higher price in the market Discuss what happens to the market price of each bond if the interest rates in the economy go up....
1. Two bonds A and B have the same credit rating, the same par value and the same coupon rate. Bond A has 30 years to maturity and bond B has five (5) years to maturity. Please demonstrate your understanding of interest rates risk by answering the following questions :● Discuss which bond will trade at a higher price in the market● Discuss what happens to the market price of each bond if the interest rates in the economy go...
The trade dispute between China and the US has left some fearing a global slowdown and perhaps a world-wide recession. If the latter occurs, the Canadian economy will certainly experience a recession. What would you expect to happen to Canadian real national income and its growth rate over the next few quarters? What is likely to happen to the output gap? the unemployment rate? Briefly explain.
If the interest rates on all bonds rise from 5 to 6 percent over the course of the year, as an investor which bond would you prefer to have been holding? A. A bond with one year to maturity. B. A bond with five years to maturity. C. A bond with ten years to maturity. D. A bond with fifteen years to maturity. E. A bond with twenty years to maturity. In relation to foreign exchange rates: A. Under PPP,...
Describe why investors may choose to use futures contracts as part of their investment strategy.(10 marks) What is meant by a protective put and why would an investor use it. (15 marks) What type of view would you expect an investor to have if buying a straddle, give an example?(10 marks)
11. The interest rate on one-year risk-free bonds is 4.25 percent in the United States and 3.75 percent in Switzerland. The current exchange rate is $0.65 per Swiss frand. Suppose that you are a U.S, investor and you expect the Swiss franc to appreciate 2.75 percent over the next year. a. Calculate the foreign currency risk premium. b. Calculate the domestic currency return on the foreign bond, assuming that your cur- rency appreciation expectations are met
You work for an asset manager specializing in bonds. You are expecting that the yield-to-maturity of Greek sovereign bonds will decline from 7.12% to 5.20% over the next two months. At the same time, you expect the yield-to-maturity of German sovereign bonds (with similar maturity, coupon rate and face value) to increase from 0.25% to 1.35%. Which bond should you buy? Which bond should you avoid?
Instructions Please read the following scenario, complete the required task, and discuss the questions below. Martin and Samantha need your help again to determine the best course of action for their company. YourName Corporation has decided to offer an employee 401(k) retirement plan. This plan will consist of the following mutual fund investment choices Money Market mutual fund AAA rated Corporate bond fund US Government Treasury Bond fund A Corporate Junk bond fund A "Blue Chip" stock fund An emerging...
Alternative Bond Investments and Investor Objectives Bonds can serve multiple objectives of an investor. A bond can offer a fixed income for a certain period of time, through its coupon payments, or offer wealth creation with relatively low risk. Furthermore, as part of a portfolio that includes riskier assets, bonds can be used as hedging instruments, or form the basis for higher risk tolerance in the risky component of a portfolio. The degree to which any of these possible investor...
An investor with $105,000 to invest feels that XYZ’s stock price will increase over the next 3 months. The current stock price is $105 and the price of a 3-month call option with a strike of 110 is $5. To make money, the investor can either buy the stock or invest in call options on the stock. How high does the stock price have to rise for the option strategy to be as profitable as an investment in the stock?...