CNCT ACC CORPORATE FINANCE
12th Edition
ISBN: 9781264604081
Author: Ross
Publisher: MCGRAW-HILL HIGHER EDUCATION
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Question
Chapter 8, Problem 14CQ
Summary Introduction
To explain: The controversy behind the unsolicited bond ratings by some agencies.
Bond Rating:
The bond rating refers to assigning grade to the bonds. The grade which is assigned represents the quality of credit related to the bonds. This rating helps in evaluating the financial strength of the issuer.
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B. Sovereign debt (issued bonds) are typically considered as proxies for risk free. Discuss the reasons why sovereign debt may not be risk free. Why might credit ratings agencies give different credit ratings to sovereign debt issued by the same country, depending on coupons denominated in domestic or foreign currency.
Discuss the similarities and differences between a bond repurchase agreement anda sale and buyback transaction. How do repos done by securities dealers differ from those done by central banks?
Explain how the bond market facilitate government (fiscal) policies. How do you think the bond market could discipline a government & discourage the government from borrowing (& spending) excessively?
Chapter 8 Solutions
CNCT ACC CORPORATE FINANCE
Ch. 8 - Prob. 1CQCh. 8 - Prob. 2CQCh. 8 - Prob. 3CQCh. 8 - Yield to Maturity Treasury bid and ask quotes are...Ch. 8 - Coupon Rate How does a bond issuer decide on the...Ch. 8 - Real and Nominal Returns Are there any...Ch. 8 - Prob. 7CQCh. 8 - Prob. 8CQCh. 8 - Term Structure What is the difference between the...Ch. 8 - Crossover Bonds Looking back at the crossover...
Ch. 8 - Municipal Bonds Why is it that municipal bonds are...Ch. 8 - Prob. 12CQCh. 8 - Treasury Market Take a look back at Figure 8.4....Ch. 8 - Prob. 14CQCh. 8 - Bonds as Equity The 100-year bonds we discussed in...Ch. 8 - Bond Prices versus Yields a. What is the...Ch. 8 - Interest Rate Risk All else being the same, which...Ch. 8 - Prob. 1QAPCh. 8 - Prob. 2QAPCh. 8 - Prob. 3QAPCh. 8 - Prob. 4QAPCh. 8 - Prob. 5QAPCh. 8 - Prob. 6QAPCh. 8 - Prob. 7QAPCh. 8 - Prob. 8QAPCh. 8 - Prob. 9QAPCh. 8 - Prob. 10QAPCh. 8 - Prob. 11QAPCh. 8 - Prob. 12QAPCh. 8 - Prob. 13QAPCh. 8 - Prob. 14QAPCh. 8 - Prob. 15QAPCh. 8 - Prob. 16QAPCh. 8 - Prob. 17QAPCh. 8 - Prob. 18QAPCh. 8 - Prob. 19QAPCh. 8 - Prob. 20QAPCh. 8 - Prob. 21QAPCh. 8 - Prob. 22QAPCh. 8 - Prob. 23QAPCh. 8 - Prob. 24QAPCh. 8 - Prob. 25QAPCh. 8 - Prob. 26QAPCh. 8 - Prob. 27QAPCh. 8 - Prob. 28QAPCh. 8 - Prob. 29QAPCh. 8 - Prob. 30QAPCh. 8 - Prob. 31QAPCh. 8 - Prob. 32QAPCh. 8 - Prob. 33QAPCh. 8 - Prob. 34QAPCh. 8 - Prob. 35QAPCh. 8 - Prob. 1MCCh. 8 - Prob. 3MCCh. 8 - Prob. 5MCCh. 8 - Prob. 6MCCh. 8 - Prob. 7MC
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Similar questions
- Which of the following statements is false? A. The sovereign credit rating is a risk of a national government becoming unable to satisfy its loan obligations. B. Bond prices are inversely related to spreads. C. Issuer credit ratings are based on the overall creditworthiness of the firm. D. Liquidity is observed when there is a large difference between the offered sale price and the bid price.arrow_forwardCan you answer the question in the picture, please?arrow_forwardWhat is a credit default swap (CDS)? A form of insurance against governments and corporations going bust. A type of stock investment used to hedge short positions. A form of government regulation promoting ESG compliance.arrow_forward
- What is a key function of credit-rating agencies? Docredit-rating agencies always provide reliable information? What was the role of credit-rating agencies in thesub-prime crisis of 2008?arrow_forwardWhich innovation has caused the most trouble for financial institutions that issue residential mortgage loans? A. Securitization B. Junk bonds C. Commercial paper D. None of the abovearrow_forward1 Would bank supervision be made easier if banks' CAMELS ratings were made available publicly? What might be the downside of public announcement of such ratings?arrow_forward
- Why are U.S. government securities viewed differently from state and local government securities in terms of default risk?arrow_forwardAn open market operation is an instrument of monetary policy which involves buying or selling of ________from or to the public and banks: a. Bonds and Other local securities b. Debentures and Shares c. Government Securities d. None of Thesearrow_forwardWhich of the following is a form of financing consist of short term unsecured promissory note issued by firms with a high credit rating? a. Commercial Papers b. Treasury Bills c. Bankers’ Acceptance d. Bills of Exchangearrow_forward
- Which of the following should a bank do if they wish to engage in both security rating and investment banking? Group of answer choices a. Restrict prepublication of analyst reports to research personnel only b. Base compensation for analysts on positive ratings of securities c. Place analysts in the supervisory organization under sales personnel d. All of the abovearrow_forwardOverdrafts are a result of a.loans made against certificates of deposit b.banks paying wire transfers made during one business day c.banks extending credit beyond the amount specified in a line of credit d.banks paying on checks or wire transfers drawn on uncollected balances. Loan participations are: a. parts of loans that are sold to banks b. participation in the underwriting c. parts of securitized investments d. downstream investment Convenience use of credit cards refers to a. the line of credit may be raised as needed b. amounts owed being paid in full when billed c. the open-end use of the card d. none of the abovearrow_forwardWhich of the following statements is NOT true? A. Debt contracts tend to impose more restrictions on the actions of the borrower than the lender B. Larger corporations have easier access to the securities market C. The financial sector is one of the least regulated industries in the US economy D. Collateral is used to secure debt contractsarrow_forward
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