The following effects are likely to occur in the Bond Market if there is an EconomicExpansion, EXCEPT:Total Demand for Bonds will expandO Total Supply of Bonds will expandO Price per Bond will decreaseO Return on Bonds will decreasepactMoneyDoNds.

If there is an economic expansion, the demand for bonds will be higher in the market. It will lead…

Answered: The following effects are likely to…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 9E

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Economics What is the probability of default if the risk premium demanded by bond holders is 2% and the return on the riskless bond is 5% (round to the nearest decimal point) Savet a. 1.9% b. All of the answers here are incorrect Oc 1.3% Od. 21% Oe2.8%
The following factors could likely cause an Increase in the Demand for Bonds, EXCEPT: O Increase of Investor's Wealth. Increase in market interest rate. Decrease in Riskiness of Bonds. O Increase of Liquidity of the Bonds. supp
Suppose you are in charge of the financial departmentof your company and you have to decide whether toborrow short or long term. Checking the news, yourealize that the government is about to engage in amajor infrastructure plan in the near future. Predictwhat will happen to interest rates. Will you advise borrowing short or long term?
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When the economy is expected to enter into a recession, a BB rated bond would A be impossible to sell B show a higher yield than when the economy was stronge C likely default very soon D be converted to a zero-coupon bond
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Interest rate risk; a. is the risk that a bond's coupon rate may change over time b. is lesser for bonds with a longer term as compared to bonds with a shorter term c. is zero on the date of maturity of a bond d. is the risk that the market interest rate may remain constant
4. Tompton has estimated that near the point of equilibrium, the demand curve and sunnly oum for bonds can be estimated using the following equations: Bd: Price = -2 Quantity + 850 BS: Price = Quantity + 600 a. What is the expected equilibrium price and quantity of bonds in this market? b. Given your answer to part (a), which is the expected interest rate in this marketo
K What is the shape of the yield curve given in the following term structure? What expectations are investors likely to have about future interest rates? (Click on the following icon in order to copy its contents into a spreadsheet.) Term Rate (EAR, %) % calculator Ask my instructor 5 1 year 1.99 2 years 2.39 Search or enter website name 6 What is the shape of the yield curve given the term structure? (Select the best choice below.) OA. The yield curve is a flat yield curve. OB. The yield curve is a normal yield curve (increasing). OC. It is hard to tell because we are not given an EAR for every year. O D. The yield curve is an inverted yield curve (decreasing). 3 years 2.76 MacBook Pro 5 years 3.35 & 7 years 3.77 Clear all S ( BAHBABY 7 8 9 19 10 years 4.14 20 years 4.94 Check answer 0
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Modified duration . represents the 9% impact – expressed as a number, not as a decimal – on price given a 19% change in yield. · represents the weighted average term to maturity – expressed in years - of a bond's cash fiows. represents the S impact on a bond's price of a 100-basis point change in interest rates. is useful for quantifying a bond's credit risk.

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The following effects are likely to occur in the Bond Market if there is an Economic Expansion, EXCEPT: Total Demand for Bonds will expand O Total Supply of Bonds will expand O Price per Bond will decrease O Return on Bonds will decrease pact Money DoNds.