At the end of 2020 and the beginning of 2021, coupon rates on long-term T-notes and T-bonds were near historic lows. Further, the federal government was running a historically large budget deficit in an effort to stimulate an economy battered by COVID-19 and to support millions of unemployed workers. Some investment advisers warned that this could be a particularly bad time to invest in government bonds or bonds in general. Why

Q: Scenario A car manufacturing company loses 40% of its market share and has a declining investment in…

A: The yield is the annual rate of return that an investor would get if they held the bond until…

Q: Public debt arises as a result of financing successive budget deficits through borrowing. The public…

A: G-secs and treasury bills are the instrument used by government to raise funds where government…

Q: Avi’s investments have had disappointing returns. The interest rates on his mutual fund and bond…

A: Investments refer to the act of allocating resources, usually money, with the expectation of…

Q: For some months now, the central bank has reduced the attention it pays to the levels ofinterest…

A: Money supply-Central banks like Fed, Bank of England etc., can affect the quantity of money in…

Q: (b) Given that nothing else is borrowed in the near future, the length of time it will take a…

A: Yield to maturity (YTM) is the overall rate of return a bond will have earned once it has paid all…

Q: During the great recession, under the Obama administration, business analysts in the financial…

A: DuPont model is used for calculating return on equity. ROE depends on various factors, so one needs…

Q: To assist with the economic recovery in the aftermath of 2008/2009 and 2020 recessions, the Federal…

A: During period of extreme crisis i.e., deep recession , conventional monetary tools can have limited…

Q: 1. During the pandemic, many businesses had fewer opportunities to invest. This shifts the supply of…

A: 1. When companies have lower fewer opportunities, the supply of bonds will decrease. This will…

Q: In December 2017, President Trump signed the Tax Cuts and Jobs Act. The Act cut the corporate…

A: The answer is  A. True

Q: What comment can be made in reply to this paragraph ? The stock market experiences influence from…

A: The paragraph talks about various factors and elements that tend to influence the stock market. The…

Q: Which of the following was NOT a direct and major consequence of the 2007-2009 U.S. Subprime…

A: The objective of the question is to identify which of the given options was not a direct and major…

Q: Consider a zero-coupon bond with a $100 face value and 10 years left until maturity. If the YTM of…

A: Face value of the bond = $100 Maturity period = 10 years Yield to maturity (YTM) = 0.111 (i.e.…

Q: ent budget deficits and to refinance maturing government debt. Statement 2: Commercial paper,…

A: Introduction : In simple words, commercial paper can be understood as n instrument issued in the…

Q: Apart from risk components, several macroeconomic factors—such as Federal Reserve (the Fed) policy,…

A: The objective of the question is to determine the validity of the given statements based on the…

Q: For each of the following events, explain what the impact would be on the yield-to-maturity: The…

A: Introduction: When a bond is downgraded by a rating agency, it means the creditworthiness of the…

Q: By mid-2007 at the start of the financial crisis U.S. financial institutions were holding more than…

A: Subprime mortgage means providing loans to subprime borrowers. Subprime borrowers are risky…

Q: Find the net exposure of the British subsidiary of the U.S. MNC with the following intra affiliate…

A: The business between two or more countries involving the exchange of goods, services, and…

Q: (Q8) If income tax rates rise, then O the prices of municipal bonds will fall. O the interest rate…

A: The possible tax advantages of municipal bonds are one of its main attractions. Most interest income…

Q: Along with the crash in the real estate and financial markets, 2008 also was a period of above…

A: Given:Nominal rate =4.53%Inflation rate =5.6%

Q: 1) Fiscal policy refers to a) making changes in private expenditures as a result of changes in…

A: The objective of the first question is to identify the correct definition of fiscal policy. Fiscal…

Q: The Bank of England’s Monetary Policy Committee raised interest rates to 3.5 per cent on December…

A: Optimal portfolio: It is that part of the chart which considers the efficient parts of the…

Q: 41) Sweep accounts A) have made reserve requirements nonbinding for many banks. B) sweep funds out…

A: Sweep accounts are financial tools used by banks and financial organizations to effectively manage…

Q: Suppose banks desire to hold no excess reserves and that the Fed has set a reserve requirement of 20…

A: The reserve required is the amount of deposit that is to be retained and can not use to give the…

Q: Suppose management is unwilling to permit losses exceeding 22% of a financial institution’s capital…

A: Concentration limit is calculated as shown below. Concentration limit=Capital×Maximum alloable loss…

Q: Madison Motors has provided you the following information: The yield to maturity on their newly…

A: As per the given information:To determine:Madison Motor WACC

Q: 9. In 2016, when the interest rate on 10-year German government bonds became negative, an article in…

A: Expectation theory predicts the prices of future short-term interest rates through analysis of…

Q: Which of the following was NOT a direct and major consequence of the 2007-2009 U.S. Subprime…

A: The problem case focuses on identifying an event that is not a direct or major consequence of the…

Q: Slush Corporation has two bonds outstanding, each with a face value of $3.1 million. Bond A is…

A: Payoff refers to the amount that is paid in actuality for satisfying the terms of the amount of the…

Q: The government will be decreasing income taxes. To an entity producing luxury bags, it would: A.…

A: A change in income taxes results in a change in the economic growth because the disposable income of…

Q: The zero-lower-bound problem: A. creates a negative shock to the economy. B., occurs because people…

A: Zero- lower- bound Nominal interest rates cannot fall (much) below zero, because  holding cash (for…

Q: Based on economists' forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for…

A: Here, R10.35%E 2R11.50%L20.04%E 3R11.60%L30.08%E 4R11.90%L40.10%

Q: O Liquidation

A: Reorganization is the process of making changes in the existing business to help it in achieving…

Q: If the Fed were to reduce course and suddenly start buying twice as much federal debt as it has in…

A: The bond price and interest rates are inversely correlated with each other. When there will be…

Q: To assist with the economic recovery in the aftermath of 2008/2009 and 2020 recessions, the Federal…

A: Large Scale Asset Purchases (LSAP) is popularly known as Quantitative Easing (QE) in USA.

Q: A bank is considering adding secuirtt underwriting services to the services it offers. It has…

A: The standard deviation is the measure of risk that is denoted in the same units as the measure of…

Q: Which of the following statements correctly describes characteristics of an Australian 13-week…

A: Treasury notes are an important source of short term finance in the economy and are used to raise…

Q: Suppose in 1978 there is a surprise recession expected to last until 1979 and in response the Bank…

A: Recession is referred as the business cycle, which has the contraction at the time of decline in an…

Q: he Federal Reserve decided to buy bonds in order to bring the economy back to full employment. This…

A: Federal Reserves decided to buy bonds in order to bring the economy back to full employment. In…

Budgeted Income Statement

Accounting is the process of recording business-related financial transactions. The process of accounting involves summarizing and analyzing the transactions. The financial statements which are prepared in accounting contain a summary of the various transactions that took place within a certain accounting period. Book-keeping or accounting is one of the most important activities of any business.