Homework Answers
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Q - 5 - YOUR REQUIRED ANSWER IS OPTION B.
Given a rise in interest rates, bond price will fall but the bond with higher maturity will fall more than the bond with smaller maturity.
Q - 6 - YOUR REQUIRED ANSWER IS OPTION B : DEFAULT RISK PREMIUM
Premium to offset possibikity of non-payment by a bond issuer is called default risk premium.
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D Question5 10 pts If market interest rates rise: O short-term bonds will decline in value...
risk refers to the possibility that interest rates will rise and cause a decrease in the...
risk refers to the possibility that interest rates will rise and cause a decrease in the value of a security. Interest rate O Default Reinvestment Liquidity
Please correct if I'm wrong and finish the rest. Appreciated 9. Determinants of market interest rates...
Please correct if I'm wrong and finish the rest. Appreciated
9. Determinants of market interest rates Aa Aa E Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Component R eal risk-free rate Symbol [ p* L Real risk-free rate Liquidity risk premium JI N LP Characteristic This is the rate on short-term Government of Canada securities, assuming there is no inflation. It is calculated...
drop down option the same for all questions Which tend to be more volatile, short- or...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual sell bonds causing interest rates to fall B. Individuals sell bonds causing interest rates to rise C. Individuals buy bond causing interest rates to fall D. Individuals buy bonds causing interest rates to rise 31. If the money demand curve shifts to the left. Interest rates ----and bond prices A. Fall; rise B. Fall; fall C. Rise; rise D. Rise;fall 32. When the growth...
You expect both the short term and long term rates of interest to rise. Explain which...
You expect both the short term and long term rates of interest to rise. Explain which of the following two bonds will you buy? Bond ZWQ with a duration of 3 or ZQW with a duration of 30?
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less....
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
Which statement is correct? None of these. Long-term bonds have lower reinvestment rate risk than short-term...
Which statement is correct? None of these. Long-term bonds have lower reinvestment rate risk than short-term bonds. Long-term and short-term bonds are equally affected by a chance in interest rates. Long-term bonds have lower interest rate risk than short-term bonds. Long-term and short-term bonds from the same company have the same default risk. If Helga Inc. issued a bond that is currently selling for $950 has 7 years left until maturity and currently as a 9.4% yield to maturity. What...
3. Determinants of market interest rates Aa Aa Some characteristics of the determinants of nominal interest...
3. Determinants of market interest rates Aa Aa Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the rate for a short-term riskless security when inflation Real risk-free rate is expected to be zero. TRF This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time. As interest rates rise, bond...
6) Which of the following statements about bonds is true? A) If market interest rates are...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
Question 15 1 pts A long-term bondholder is most concerned about potentially rising interest rates. This...
Question 15 1 pts A long-term bondholder is most concerned about potentially rising interest rates. This specific type of risk is referred to as: Liquidity risk Default risk Reinvestment risk Price risk
risk refers to the possibility that interest rates will rise and cause a decrease in the value of a security. Interest rate O Default Reinvestment Liquidity
Please correct if I'm wrong and finish the rest. Appreciated
9. Determinants of market interest rates Aa Aa E Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Component R eal risk-free rate Symbol [ p* L Real risk-free rate Liquidity risk premium JI N LP Characteristic This is the rate on short-term Government of Canada securities, assuming there is no inflation. It is calculated...
drop down option the same for all questions
Which tend to be more volatile, short- or long-term interest rates? Long-term interest rates Short-term interest rates If the inflation rate was 2.60% and the nominal interest rate was 6.00% over the last year, what was the real rate of interest over the last year? Disregard cross-product terms; that is, if averaging is required, use the arithmetic average. O 3.40% 3.91% 2.89% 4.25% Component Symbol Characteristic This is the rate for a...
30. If there is an excess demand for money using the liquidity preference theory) A. Individual sell bonds causing interest rates to fall B. Individuals sell bonds causing interest rates to rise C. Individuals buy bond causing interest rates to fall D. Individuals buy bonds causing interest rates to rise 31. If the money demand curve shifts to the left. Interest rates ----and bond prices A. Fall; rise B. Fall; fall C. Rise; rise D. Rise;fall 32. When the growth...
2. Types of short-term bonds Short-term debt securities have a maturity of one year or less. The characteristics of the debt securities will depend upon the capital n borrower and the investment needs of the lender. In the following table, identify the term that best matches each type of short-term d being described Definit Term Tiger Telecommunications Company needs to borrow $1 million overnight and is willing to secure the loan with a portfolio of securities that the borrower will...
3. Determinants of market interest rates Aa Aa Some characteristics of the determinants of nominal interest rates are listed as follows. Identify the components (determinants) and the symbols associated with each characteristic: Characteristic Component Symbol This is the rate for a short-term riskless security when inflation Real risk-free rate is expected to be zero. TRF This is the premium added to the real risk-free rate to compensate for a decrease in purchasing power over time. As interest rates rise, bond...
6) Which of the following statements about bonds is true? A) If market interest rates are above a bond's coupon interest rate, then the bond will sell below its par value. B) As the maturity date of a bond approaches, the market value of a bond will become more volatile. C) Bond prices move in the same direction as market interest rates. D) Long-term bonds have less interest rate risk than do short-term bonds.
Question 15 1 pts A long-term bondholder is most concerned about potentially rising interest rates. This specific type of risk is referred to as: Liquidity risk Default risk Reinvestment risk Price risk
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