Why are mortgage backed securities paid higher interest rates than other investments like time deposits, and US government bonds

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: If interest rates in the financial markets increase after a bond is issued, what will happen to the…

A: A bond is an instrument that represents the loan that is made by the investor to the company and…

Q: Which of the following is the worst measure of the cost of debt? Estimating Interest Rate based on…

A: The cost of debt is the effective return that a company pays for its debt to its debtholders. It is…

Q: Are US Treasury bonds truly risk free?

A: United state treasury bonds are reflective of all such treasury securities which are protected…

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: What is the difference between face rate and market rate, and which rate would be higher if a bond…

A: There are many types of financial instruments issued to raise funds.

Q: What is the difference between an investment - grade bond and a junk bond?  2 .  What are the…

A: The primary difference between an investment grade bond and a junk bond lies in the credit quality…

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: Interest Payments and Interest Expense for Bonds (Straight Line) Swiss Inc. sold 20-year bonds with…

A: ''It is a question with multiple sub-parts, therefore we will do the first three sub-parts. To get…

Q: Which are the major types of mortgage-backed securities currently in use?

A: Following are the major types of mortgage-backed securities currently in use: Pass-through MBS It…

Q: What ratings comprise investment-grade bonds and what ratings are used for junk bonds?

A: “Hey, since there are multiple questions posted, we will answer first question. If you want any…

Q: How does commercial paper differ from a bank loan? Why is the interest rate often less for…

A: Commercial PaperCommercial paper is promissory notes that represent loans issued by the companies.…

Q: if the market rate of interest is lower than the stated rate, bonds will sell at an amount ?

A: Solution: if the market rate of interest is lower than the stated rate, then bond will sell at an…

Q: When the Fed p

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

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: Explain Commercial Mortgage-Backed Securities (CMBSs)?

A: Commercial mortgage backed securities: These are fixed-income securities that are backed by…

Q: Debt Securities - These securities are in the form of debt or borrowings which have to be repaid by…

A: Debt Securities or Debt Instruments - Debt securities are financial instruments that provide their…

Q: Should financial institutions invest in junk bonds?

A: The answer for the theory question on junk bonds is discussed hereunder.  Dear student,  As you have…

Q: Why do most municipal bonds pay lower interest than riskless Treasury bonds?

A: Municipal as well as Treasury bonds are backed by the government and therefore are less risky. The…

Q: Why are bonds sometimes issued at a discount?

A: The correct answer is: (A) The stated rate of interest is lower than the rate being paid on…

Q: Will you choose to invest in bonds if you are an investor? Why?

A: A bond is a long-term investment instrument that requires a corporation to return the amount of the…

Q: The U.S. government, with a loan guarantee, has provided a to the holders of risky bonds.

A: Loan guarantee - is a form of insurance. For example, if X deposits $100,000 in a bank, then up to…

Q: Why Would People Buy Credit Default Swaps?

A: Credit-default swaps can be defined as insurance against default risk. For instance, financial…

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: 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: How would a financial institution with a large bond portfolio be affected by falling interest rates?…

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

Q: Compare the risk of buying a U.S. government bond to that of buying acorporate bond.

A: Bonds are a financial instrument that gives its holder a fixed coupon/interest. It is a form of debt…

Q: What is the major difference between CMOs and the other mortgage-backed securities?

A: Investment in securities are traded on Secondary Market where buyer and seller purchase or sale…

Q: What are junk bonds?

A: Answer: A junk bond is a high risk and high yield bond often considered as unsecured bond that is…

Q: in why the covered interest rate parity (CIP) condition can be violated during the financial crisis…

A: Covered interest rate parity says changes in interest rate and changes in exchange rate should be in…

Q: a. b. C. Which one of these is considered to be the safest investment? U.S. Treasury Bonds The S&P…

A: Treasury Bills or T-Bills are the safest possible investment and provide a "risk free rate of…

Q: What are the similarities and differences between mortgage securities and corporate bonds?

A: Introduction: Mortgage related security is a form of security in which investor collects payment…

Q: Explain Subprime Mortgage-Backed Securities?

A: Mortgage-backed security: A mortgage-backed security is a kind of asset-backed security which is…

Q: What types of investors tend to purchase savings bonds?

A: Savings bonds are often purchased by a variety of investors due to their low-risk nature and…

Q: What are the reasons for issuing convertible bonds rather than straight debt?

A: Convertible bonds: Convertible bonds are a kind of bonds that can be easily converted into…

Q: The US treasury issues inflation-indexed bonds known as tips. TRUE/FALSE?

A: US Government issues bonds linked with the index called treasury inflation-protected securities…

Q: Why are government bonds considered safer to invest in as compared to corporate bonds?

A: A government bond is a government-issued financial asset that comprises US Treasury bonds and…

Q: Discuss the similarities and differences between a bond repurchase agreement anda sale and buyback…

A: Bonds are the kind of loan that is taken by private or government companies to meet their financial…

Q: please explain mortgage back securities and subprime loan and how lehman brother holdings used these…

A: Mortgage backed securities and sub prime loans are discussed below: