Which of the following is most true?   The nominal rate of a government long-term security can be used as a proxy for the real risk free rate.   A direct relationship is exhibited between the investors’ willingness to supply funds and the interest rates of securities.   Finance managers tend to favor more on long-term financing if the nation’s Gross Domestic Product is expected to contract.   Maturity risk premium is always included in the nominal rate of any corporate security since corporations are perceived as less riskier than government.

Q: US treasury bonds carry the full faith and credit of the us government, there fore they are…

A: The treasury bond refers to the securities issued by the entity in consideration of generating…

Q: If reserves are scarce, how would the federal funds rate change (increase or decrease) if the Fed:…

A: Federal funds is referred as an excess reserves that are held by the financial institutions for over…

Q: Considering the Market for Loanable Funds, explain what the following statement means: “Bonds…

A: The statement refers to the decision-making process for issuing bonds in the context of the market…

Q: As the investment manager of the Oman investment fund, you wish to have a well-diversified…

A: A well-diversified international bond portfolio has the advantage of reducing the unsystematic risk…

Q: Assess the regulatory environment faced by brokerages and investment banking firms. Do you consider…

A: “Hi There, Thanks for posting the questions. As per our Q&A guidelines, must be answered only…

Q: The article highlights an important relationship between the corporate bond yields and the U.S.…

A: Points for consideration: i) Bond's coupon rate is fixed ii) Price of bond fluctuate in secondary…

Q: The company's bank won't lend it any more money than it already has, and investment bankers have…

A: A covenant or Indenture is a type of undertaking accepted by an issuer to restrain from doing…

Q: Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued…

A: Pre-tax yield refers to the return on the investment before considering any income tax, it is used…

Q: When the Fed p

A: Treasury bonds are the benchmark for credit spreads. Reduce the value of corporate bonds by widening…

Q: Which of the following is NOT true?       swaps (CDS) and collateralized debt obligations…

A: Usually, the rates of any reserves for the banks and financial institutions are fixed for every bank…

Q: Which of the following is generally considered the third riskiest? O Treasury bill O Long-term…

A: Risky Investment is attributed for investment options which carries some probability that returns or…

Q: A corporation suffering big losses might be more likely to suspend interest payments on its bonds,…

A: In the realm of corporate finance, the financial health of a company plays a crucial role in shaping…

Q: Would the yield spread on a corporate bond over a Treasury bond with the same maturitytend to become…

A: Answer: Yield spread is nothing but the disparity between the returns levels of two financial…

Q: Discus the view that interest rate risk management has been the most crucial in the risk management…

A: Interest rate risk is the risk of changing market rates which would affect the income and expenses…

Q: Explain why a positive yield spread typically exists between government and corporate bonds of the…

A: The yield of a bond refers to the return on the bond that is expected by the investors. It can be…

Q: Let's say that the data shows how the spread between the interest rates on corporate bonds and U.S.…

A: The investment grade bond market, which normally functions well, did not function as well during the…

Q: Banker’s Acceptances allow corporations in different countries to trade with each other because they…

A: The YTM is the rate of return an investor would experience if they kept the bond till maturity and…

Q: None

A: Detailed explanation:The closest real-world approximation to the risk-free rate of return is the…

Q: Which of the following factors would tend to increase the risk premium between corporate bonds and…

A: Several factors can contribute to an increase in the risk premium between corporate bonds and…

Q: A bond trader observes the following information:• The Treasury yield curve is downward sloping.•…

A: The objective of the question is to determine the correct statement about the yield of Treasury and…

Q: The company's bank won't lend it any more money than it already has, and investment bankers have…

A: Sinking fund is a type of fund created for repayment of debt. The owner set aside some amount…

Q: If a bank manager wants to protect the bank against losses that would be incurred on its portfolio…

A: If a bank manager wants to protect the bank against losses that would be incurred on its portfolio…

Q: Why would a company typically choose to source external financing by issuing bonds rather than…

A: Bonds are debt instruments that are used by institutions to raise capital. The face value and the…

Q: Assume a bank can invest in a government bonds at a risk-free rate of 5.6%. Alternatively, it can…

A: Bonds are fixed-income assets that serve as a representation of investor loans to borrowers…

Q: If the Federal Reserve takes on a policy of monetary restriction, the supply curve for loanable…

A: If the Federal Reserve takes on a policy of monetary restriction, it typically means that the…

Q: Due to a lack of information, a trader is not able to retrieve the yield of government bonds as the…

A: The call option price or the value of call option is affected by various factors such as strike…

Q: To strengthen the dollar using sterilized intervention, the Fed would simultaneously Treasury…

A: Sterilized intervention is the purchase or sale of foreign currency by a central bank in order to…

Q: The higher the risk of a security, the higher its expected return will be. A bond's risk level is…

A: A bond is a financial instrument that is freely traded on the exchanges and has a freely floated…

Q: Under the Pure Expectations Theory, if issuers expect interest rates to increase, O Two statements…

A: The Pure expectancy theory explains the term structure of interest rate. The theory explains that…

Q: What kind of futures hedge would be appropriate in each of the following situations?   a. A bank…

A: It represents a derivative contract where one party agrees to purchase or sell the asset at a price…

Q: Which of the following is an example of a systematic risk?     Bond investor invests in a Japanese…

A: U.S government announces an increase in corporate tax rate

Q: Now suppose there is no financial intermediary to handle liquidity shocks. However, at t = 1 a…

A: Liquidity shocks refer to sudden and severe disruptions in a financial market's liquidity, leading…

Financial Ratios

A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.

Return on Equity

The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.