How low does the market interest rate need to drop to justify refunding with a new bond issue?

Q: What happens to junk bonds in a recession

A: A junk bond refers to that that bond issued by companies that do not have an investment grade credit…

Q: What effect do you think this inflation adjusted rate has on the price of an I-bond in comparison…

A: I-Bonds also known as inflation link saving bonds are the bonds with minimal risk category…

Q: What are your thoughts about buying short term bonds vs. long term bonds in this economic situation?

A: Long-term bonds are more vulnerable to shifts in interest rates. The explanation is the existence of…

Q: How low can nominal interest rates go? Explain why they can become negative.

A: The nominal interest rate is the interest rate that is calculated before inflation is factored in.…

Q: How do risk and inflation impact interest rates in the economy?

A: Introduction: The inflation needs to be adjusted in the interest rate of mortgage payments. Due to…

Q: Would there be positive interest rates on bonds in a world with absolutely no risk

A: The fixed income securities which are issued by a firm is known as bond. The fixed income is known…

Q: Why is it an interest rate risk when investing in long-term bonds?

A: Long-term bonds are those bonds that have the longest maturity offering from U.S. Treasury.…

Q: How do Debt, CoCo, and equity price react respectively to the fluctuation of the financial market?…

A: The question is based on the concept of components of capital used by banking companies. A bank can…

Q: QUESTION 1 a) Under what conditions that a discount bond has a negative nominal interest rate? Is it…

A: Bonds- A bond is a contract between two parties that specifies the principal amount to be paid at…

Q: How do investors deal with inflation when they determine interest rates in the financial markets?

A: Introduction: Inflation is an increase in the overall level of prices of products in the economy…

Q: If interest rates rise, prices of short-term bonds will decline less than long-term bonds. Is this…

A: If interest rates rise, prices of short-term bonds will decline less than long-term bonds because…

Q: How does the Liquidity Premium Theory influence the market interest rate?

A: Liquidity is the ability of a financial asset or security to convert into cash at market fair value.…

Q: Why is it important to know the interest rate risk when investing in bonds? Does interest rate risk…

A: Interest rate risk is the risk that the bond investment reduces in value which results from changes…

Q: If interest rates increase because of a previously unanticipated inflation rate risk?…

A: Answer -  If interest rates increase because of a previously unanticipated inflation rate risk as a…

Q: What advantage does hedging using money market rates have over using interest rate futures?

A: However, there are also some drawbacks to consider:Potential Lower Returns: Interest earned on money…

Q: Explain what a first-to-default credit default swap is. Does its value increase or decrease as the…

A: A First-to-Default Credit Default Swap (FTD CDS) is a financial derivative instrument used in the…

Q: affect future bond prices?

A: 1. Interest and inflation rates are directly proportional to each other . (Keep other factors…

Q: If we were to keep a bond until maturity, would interest rate risk still matter? and why?

A: Bond Risk refers to various risks that are specifically associated with investment in bonds for…

Q: Explain the impact of a decline in interest rates on the prices of existing bonds.

A: Bonds prices are related to interest rate in market. Prices of bond depends on rate of interest in…

Q: Why is it said that zero-coupon bonds lock in the reinvestment rate?

A: The objective of the question is to understand why it is said that zero-coupon bonds lock in the…

Q: Why is there a risk of downgrading on long-term bonds?

A: Long-term bonds are usually for longer terms like 10, 20, 25 or 30 years. due to longer durations,…

Q: What effect does collateral have on the interest rate paid on a bond? Subordination also has an…

A: Many variables influence the interest rate on a bond, including collateral, subordination, and so…

Q: Why are investment-grade bonds more marketable and why are junk bonds issued at all?

A: Introduction: Bond is nothing but debt securities issued by a company or government if they want to…

Q: What would be the value of this bond if it paid interest semiannually? was missed ?

A: Price of bond is the present value of coupon payment and present value of par value of bond taken on…

Q: Are interest rates of junk bonds always higher or lower than investment-grade bonds? Why?

A: A bond is a financial instrument that pays interest to the investor periodically and return of…

Q: a rise in risk premium will cause bond market prices to rise? true or false?

A: A risk premium is the additional return an investor expects to earn for taking on more risk compared…

Q: if we see an increase in default rates, what may that mean for the junk bond market and for…

A: Junk bonds are those bonds that carry a very high risk of default.  These bonds are issued by…

Q: Can the actual real rate of interest be negative? When ? Can the expected real rate be negative?

A: Yes, the actual real interest rate can be negative. This can happen when the actual inflation rate…

Q: Can real interest rates be negative

A: The real rate of return is calculated to ascertain the actual return on investment considering the…

Q: When a borrower is unable to repay its loan, it is common that the lender would negotiate with the…

A: Debt restructuring is available for companies, individual and also countries. It is adapted to…

Q: Explain the impact of a decline in interest rates on the present value of existing bonds.

A: Bonds are fixed income earning instruments where the investor lends money to the company in exchange…