Assume a bank can invest in a government bonds at a risk-free rate of 5.6%. Alternatively, it can invest in a corporate bond with a default probability of 6.5%. If the issuer defaults, the bank expects to recover 28.3% of the investment. A risk-averse bank that requires an additional premium of 2.9% as a result of risk aversion would be indifferent between investing in the government bond and the corporate bond if the corporate bond offers a rate of __________. Calculate the answer by read surrounding text. %. Round to the nearest 0.01%, drop the % symbol. E.g., if your answer is 0.10245 or 10.245%, record it as 10.25.

Under the Pure Expectations Theory, if issuers expect interest rates to increase, O Two statements are correct. O borrowers will generally prefer to issue short-term securities rather than long-term securities. O the corresponding decrease in the demand for long-term funds by borrowers places downward pressure on long-term funds. O Three statements are correct. O there is downward pressure on the yield of short-term funds. O Only one statement is correct. O they will prefer to lock in the present interest rate over a long period of time.

Under normal conditions, which of the following would be most likely to increase the coupon rate required for a bond to be issued at par?   a. The rating agencies change the bond's rating from Baa to Aaa.     b. Adding additional restrictive covenants that limit management's actions.     c. Adding a sinking fund.     d. Adding a call provision.     e. Making the bond a first mortgage bond rather than a debenture.

Nhich of the below statements is TRUE? O a. Frequently, the ability of an issuer to make interest and principal payments is seriously and unexpectedly changed by a naturai or industrial accident or some regulatory change. O b. The lowest-grade bonds are designated by Moody's by the symbol Aaa and by the other three rating systems by the symbol AA O . Fixed-rate securities are attractive to some institutionial investors because they allow them to buy an asset with an income stream that closely matches the floating nature of the income of some of their liabilities. O d. Each rating agency periodicalily publishes a table showirig the upgrade and downgrade history of the issues that it rated.