BARUCH FUND OF CORPORATE FIN. W/CONNECT
10th Edition
ISBN: 9781264531820
Author: BREALEY
Publisher: MCG CUSTOM
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Question
Chapter 14, Problem 11QP
a.
Summary Introduction
To determine: If the company A has call option.
b.
Summary Introduction
To calculate: The interest paid on bonds of company A.
c.
Summary Introduction
To determine: If the company A can issue secure debt ahead of the issue.
d.
Summary Introduction
To determine: The rating of bonds of company A.
e.
Summary Introduction
To determine: The repayment schedule of bonds of company A.
f.
Summary Introduction
To determine: If the bonds of company A are funded or unfunded.
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See the chart below. The top line shows the 90 day yield on corporate bonds and
the bottom line is the US Treasury bill (TB) rate for similar maturity. The yield is
shown on the y-axis. Notice that the gap between the two curves got wider during
the recession years of 2008-2009.
Which of the following reasons can possibly explain this widening?
FRED
6
сл
5
4
3
2
1
0
-1
2006
·
1950
2008
2010
2012
2014
Shaded areas indicate US recessions - 2014 research.stlouisfed.org
A) During the recession, the government decided to cut the tax rate on interest
earned from corporate bonds but not on interest earned on TB.
B) During the recession, the relative risk on corporate bonds increased.
C) During the recession, the relative liquidity of corporate bonds increased.
D) Two of the first three options can explain this.
E) All of the first three options can explain this.
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BARUCH FUND OF CORPORATE FIN. W/CONNECT
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