One reason why short- term Corporate yield curves are higher than that of short-term Treasury securities, is that short-term O Corporate securities have a maturity risk premlum. O Treasury securities have a lower maturity risk premlum than that of Corporate securities O Corporate securities have a hlgher maturity risk premium than that of Treasury securities O Treasury securities have no liquidity premlum. O Treasury securities have no maturity risk premium.

One reason why short- term Corporate yield curves are higher than that of short-term Treasury securities, is that short-term O Corporate securities have a maturity risk premlum. O Treasury securities have a lower maturity risk premlum than that of Corporate securities O Corporate securities have a hlgher maturity risk premium than that of Treasury securities O Treasury securities have no liquidity premlum. O Treasury securities have no maturity risk premium.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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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 bonds
Preferred stock is a hybrid security, because it has some characteristics typical of debt and others typical of equity. The following table lists various characteristics of preferred stock. Determine which of these characteristics is consistent with debt and which is consistent with equity. Characteristics Has a par, or face, value. Usually has no specified maturity date. Consider the case of Tamin Enterprises: Debt Equity ° At the present time, Tamin Enterprises does not have any preferred stock outstanding but is looking to include preferred stock in its capital structure in the future. Tamin has found some institutional investors that are willing to purchase its preferred stock issue provided that it pays a perpetual dividend of $13 per share. If the investors pay $100.15 per share for their investment, then Tamin's cost of preferred stock (rounded to four decimal places) will be
Explain why a company might issue convertible securities instead of straightforward debt or equity. Also, explain how convertibility affects expected return on investment.
Which statement is false? O A. As the term of a bond approaches zero, the price approaches kar. O B. For corporate and government bonds, the coupon payments amortize the princi OC. Overall, bond prices are less volatile than stock prices. O D. The coupon on a bond is expressed as a percentage of face value. O E. Corporate bonds can be bought and sold in the secondary market. Reset Selection
The yield to maturity for a bond is equivalent to the market's required return on the bond and is based on risk but the required return on a share of stock ks not based on risk True False
Which of the following statements is most correct? Group of answer choices A debenture is a secured bond that is backed by some or all of the firm’s fixed assets. Junk bonds typically have a lower yield to maturity relative to investment grade bonds. Subordinated debt has more default risk than senior debt. All of the statements above are correct. None of the statements above is correct.
Corporate bonds are riskier than US Treasury, so they pay default risk premium over what Treasury pays to stay competitive in the market. True False
Why do at least some investors like to invest in asset-backed securities? Check all that apply: ABS are less risky than bonds with the same rating. It lowers their capital requirements. It gives them control over more assets. ABS often pay higher interest rates than bonds with the same rating.
A bond with short maturity has less "interest rate risk" than a bond with long maturity when all other features—coupon interest rate, par value, and interest payment frequency—are the same. TRUE FALSE
Capital market securities are usually more widely traded than shorter-term securities and tend to be more liquid.Select one:TrueFalse
Which of the following is a difference between stocks and bonds? Select one: a. cash flows to bondholders are not known and not promised, cash flows to stockholders are known and promised b. companies issue stocks to grow the company and issue debt to pay bills c. required returns on debt are typically lower than required returns on equity d. dividends are legal obligations of the firm; coupons are not. Clear my choice
Explain why company managers might choose to issue zero-coupon bonds instead of interest-bearing bonds or coupon bonds instead of zero- coupon bonds? Give pros and cons of each. Be sure to consider the situation from the bond issuer's viewpoint and not the bondholder.

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