Which of the following factors would tend to increase the risk premium between corporate bonds and Government bonds? Select all that apply. 000 Small market for corporate bonds Economic recession Low average debt-to-equity ratio of firms Tax exemption for interest income from Government bonds
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- Which of the following is the worst measure of the cost of debt? Estimating Interest Rate based on Synthetic Bond Rating O Estimating Interest Rate based on Actual Bond Rating Current Bank Loan Rate Interest rate of Outstanding BondsWhich factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices Inflation rate Maturity risk Default risk and maturity risk Default riskWhich factor(s) lead to the difference of the interest between T-bill and a short-term corporate bond? Group of answer choices a)Inflation rate b)Default risk and maturity risk c)Maturity risk d)Default risk
- These are corporate bonds that have a higher rate of return with a higher level of risk? Group of answer choices Revenue bonds Junk bonds GOBs Tax increment bondsWhat happens to Bond prices, quantities, and interest rates if (Make sure to include the supply and demand graph for bonds for each question : a) Decrease in wealth b) Increase in risk c) Decrease in liquidityThe time value of money is used in calculating bond prices because: Group of answer choices A - The company might choose to repay the bonds prior to their maturity date B - Bond investors receive future payments and purchase bonds with current dollars C - The amount to be repaid at maturity will change as market rates change D - Cash interest payments to bondholders will change as market rates change
- Explain how does a bond par value differs from its market value? Are variable rate bonds attractive to investors who expect the interest rates to decrease? Explain. Would a firm that needs to borrow funds consider issuing variable rate bonds if it expects interest rates to decrease in the future? Explain.1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. A. Which of the following statements about Treasury bonds is the most accurate? Treasury bonds have a very small amount of default risk, so they are not completely riskless. Treasury bonds are completely riskless. Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. B. Based on the information given in the following statement, answer the questions that follow: In July 2009, Hungary successfully issued 1 billion euros in bonds. The transaction was managed by Citigroup. Who is the issuer of the bonds? The Hungarian government Hungary Bank Citigroup C. What type of bonds are these? Municipal bonds Corporate bonds Government bondsWhich of the following may affect yields (interest rates) on debt securities? default risk premium liquidity premium tax adjustment default risk premium AND liquidity premium default risk premium AND liquidity premium AND tax adjustment
- Which of the following lowers the required interest rate that firms have to pay on their bonds? Which of the following raise the interest that firms have to pay? Private placements Public offerings Sinking fund provisions Protective Covenants Call provisions Collateral An active secondary market A low credit ratingHigher interest rates on treasury bonds Identify whether it: (Select one choice per number) (A) increase inflation(B) decrease inflation(C) does not directly affect economic growth or cannot be determined1. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a borrower promises to pay a specified interest rate and principal at a future date. Which of the following statements about Treasury bonds is the most accurate? O Treasury bonds have a very small amount of default risk, so they are not completely riskless. O Treasury bonds are completely riskless. O Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. Based on the information given in the following statement, answer the questions that follow: In July 2009, Walmart sold 100 billion yen of five-year samurai bonds. Lead managers in the deal were Mizuho Securities, BNP Paribas, and Mitsubishi UFJ Securities. Who is the issuer of the bonds? O Mitsubishi UFJ Securities O BNP Paribas O Walmart What type of bonds are these? O Corporate bonds O Municipal bonds O Government bonds O O