True or false? The risk premium, or spread, between corporate bonds and Treasury securities tends to increase as the tim...
True or false?
The risk premium, or spread, between corporate bonds and Treasury securities tends to increase as the time to maturity increases.
Homework Answers
False
As time to maturity increases, the spread between corporate bonds and treasury securities decreases.
Add Answer to:
True or false? The risk premium, or spread, between corporate bonds and Treasury securities tends to increase as the tim...
Just the answer please 13. Bonds with relatively low risk of default are called securities and...
Just the answer please
13. Bonds with relatively low risk of default are called securities and have a rating of Baa (or BBB) and above; bonds with ratings below Baa (or BBB) have a higher default risk and are called A) investment grade; lower grade B) investment grade; junk bonds C) high quality; lower grade D) high quality; junk bonds 14. Junk bonds, bonds with a low bond rating, are also known as A) high-yield bonds. B) investment grade bonds....
5. Risks of investing in bonds Aa Aa The higher the risk of a security, the...
5. Risks of investing in bonds Aa Aa The higher the risk of a security, the higher its expected return will be. A bond's risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The following graph shows the relationship between interest rates and maturity for three security classes: US Treasury securities (USTs), AA-rated corporate bonds, and BBB-rated corporate bonds. Use the dropdown menus to label each security's profile correctly: YIELD...
Risk Premium. Sandy has a choice between purchasing $5,000 in Treasury bonds paying 7.0% interest or...
Risk Premium. Sandy has a choice between purchasing $5,000 in Treasury bonds paying 7.0% interest or purchasing $5.000 in BB-rated corporate bonds with a coupon rate of 9.2% What is the risk premium on the BB-rated corporate bonds? The risk premium on the 18-rated corporate bonds is Round to one decimal place) Enter your answer in the answer box WERINOU F G H bot
DEFAULT RISK PREMIUM A company's 5-year bonds are yielding 7.9% per year. Treasury bonds with the...
DEFAULT RISK PREMIUM A company's 5-year bonds are yielding 7.9% per year. Treasury bonds with the same maturity are yielding 5.85% per year, and the real risk-free rate (r*) is 2.75%. The average inflation premium is 2.7%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is 1.1%, what is the default risk premium on the corporate bonds? Round your answer to two...
DEFAULT RISK PREMIUM A company's 5-year bonds are yielding 8.2% per year. Treasury bonds with the...
DEFAULT RISK PREMIUM A company's 5-year bonds are yielding 8.2% per year. Treasury bonds with the same maturity are yielding 6.1% per year, and the real risk-free rate (r*) is 2.25%. The average inflation premium is 3.45%, and the maturity risk premium is estimated to be 0.1 x (t - 1)%, where t = number of years to maturity. If the liquidity premium is 1.2%, what is the default risk premium on the corporate bonds? Round your answer to two...
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...
1. At present, 20-year Treasury bonds are yielding 6.5% while some 20-year corporate bonds that you...
1. At present, 20-year Treasury bonds are yielding 6.5% while some 20-year corporate bonds that you are interested in are yielding 10.5 %. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.50% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds? Note that a Treasury security should have no default-risk premium. (5p)
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity...
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) short-term U.S. Treasury securities, (2) long-term U.S. Treasury securities, (3) short-term corporate securities, and (4) long-term corporate securities? Explain how the premiums would vary over time and among the different securities listed.
DEFAULT RISK PREMIUM A companys 5-year bonds are yielding 9.4% per year Treasury bonos ith the...
DEFAULT RISK PREMIUM A companys 5-year bonds are yielding 9.4% per year Treasury bonos ith the same maturity are yie ing 6.35% per year, and the eal risk-free ate r is 2.35%, T e average in ation premium is 3.6% and the maturity risk premium s estimated to be 0.1 × where t = number of years to maturity. If the liquidity premium is 1.4%, what is the default risk premium on the corporate bonds? Round your answer to two...
Which of the following statements are TRUE? A) A decrease in default risk on corporate bonds...
Which of the following statements are TRUE? A) A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds. B) The expected return on corporate bonds decreases as default risk increases. C) A corporate bond's return becomes less uncertain as default risk increases. D) As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds. Answer: B WHY ACD FALSE?
Just the answer please
13. Bonds with relatively low risk of default are called securities and have a rating of Baa (or BBB) and above; bonds with ratings below Baa (or BBB) have a higher default risk and are called A) investment grade; lower grade B) investment grade; junk bonds C) high quality; lower grade D) high quality; junk bonds 14. Junk bonds, bonds with a low bond rating, are also known as A) high-yield bonds. B) investment grade bonds....
5. Risks of investing in bonds Aa Aa The higher the risk of a security, the higher its expected return will be. A bond's risk level is reflected in its yield, but understanding the different risks involved when investing in bonds is important. The following graph shows the relationship between interest rates and maturity for three security classes: US Treasury securities (USTs), AA-rated corporate bonds, and BBB-rated corporate bonds. Use the dropdown menus to label each security's profile correctly: YIELD...
Risk Premium. Sandy has a choice between purchasing $5,000 in Treasury bonds paying 7.0% interest or purchasing $5.000 in BB-rated corporate bonds with a coupon rate of 9.2% What is the risk premium on the BB-rated corporate bonds? The risk premium on the 18-rated corporate bonds is Round to one decimal place) Enter your answer in the answer box WERINOU F G H bot
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...
1. At present, 20-year Treasury bonds are yielding 6.5% while some 20-year corporate bonds that you are interested in are yielding 10.5 %. Assuming that the maturity-risk premium on both bonds is the same and that the liquidity-risk premium on the corporate bonds is 0.50% while it is 0.0% on the Treasury bonds, what is the default-risk premium on the corporate bonds? Note that a Treasury security should have no default-risk premium. (5p)
c. Define the terms inflation premium (IP), default risk premium (DRP), liquidity premium (LP), and maturity risk premium (MRP). Which of these premiums is included in determining the interest rate on (1) short-term U.S. Treasury securities, (2) long-term U.S. Treasury securities, (3) short-term corporate securities, and (4) long-term corporate securities? Explain how the premiums would vary over time and among the different securities listed.
DEFAULT RISK PREMIUM A companys 5-year bonds are yielding 9.4% per year Treasury bonos ith the same maturity are yie ing 6.35% per year, and the eal risk-free ate r is 2.35%, T e average in ation premium is 3.6% and the maturity risk premium s estimated to be 0.1 × where t = number of years to maturity. If the liquidity premium is 1.4%, what is the default risk premium on the corporate bonds? Round your answer to two...
Most questions answered within 3 hours.
-
Accent Software faces the following conditions. All of these
support Accent’s use of a market-penetration pricing...
asked 15 minutes ago -
A mathematically inclined friend emails you the following
instructions: "Meet me in the cafeteria the first...
asked 18 minutes ago -
A monopoly sells in two countries . The demand curves in the two
countries are p1...
asked 1 hour ago -
A .15kg rubber ball is bounced off a wall. Before hitting the
wall, the ball moves...
asked 1 hour ago -
A manufacturing company preparing to build a new plant is
considering three potential locations for it....
asked 1 hour ago -
B. If compound Y has approximately the same values of solubility
in toluene as compound X,...
asked 2 hours ago -
Oscar Inc. has inventory in Japan valued at 39,051,000 Yen one
year ago. One year ago...
asked 2 hours ago -
If Canada suffered from "fundamental disequilibrium," and its
government choose not to devalue its currency, a...
asked 2 hours ago -
4. How many input & output Key Value Pairs are passed into,
and emitted out of...
asked 2 hours ago -
Why would your heart not function well if constructed of
skeletal muscle? What is the particular...
asked 3 hours ago -
Please respond to this essay question in full essay form for
Chemistry 1102 Organic and Biochemistry:...
asked 3 hours ago -
Determine the head loss and velocity of flow in a water supply main
of 15.0 cm...
asked 3 hours ago