Are interest rates of junk bonds always higher or lower than investment-grade bonds? Why?

Q: What impact do interest rates have on bond prices? What are the basic assumptions that go into…

A: This question explains about the fundamental assumptions that go into establishing the value of a…

Q: How low does the market interest rate need to drop to justify refunding with a new bond issue?

A: Step 1 NPV is employed in capital budgeting and investment going to analyze the gain of a projected…

Q: What are the main advantages and disadvantages of            investing in bonds?

A: Bonds are debt instruments issued by an entity. The issuing entity can either be a corporate entity…

Q: What effect do interest rates have on bond prices? What are the underlying assumptions that go into…

A: Bond: Bond refers to debt security issued by the company from the debt investors to raise capital.…

Q: Why is the required rate of return on a bond different than the copoun rate

A: Bonds are the debt securities which are issued by the corporates or the government to raise the…

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 are the more recently issued (and more frequently traded) bonds called? Why do investors favor…

A: The more recently issued (and more frequently traded) bonds are called Treasury Bonds which are…

Q: Identify and explain two traditional theories which seek to explain the term structure of interest…

A: Term structure of interest rate shows the interest rates for different period of time. One year…

Q: How do interest rates affect bond valuations? What are the key assumptions in valuing a bond?

A: Bonds are the form of debt payable by the company. Interest rates on bonds to be paid is coupon…

Q: Would there be positive interest rates on bonds in a world with absolutely no risk

A: The fixed income securities which are issued by a firm is known as bond. The fixed income is known…

Q: Why is it an interest rate risk when investing in long-term bonds?

A: Long-term bonds are those bonds that have the longest maturity offering from U.S. Treasury.…

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: what is the difference between an investment grade bond and a junk bond?

A: Solution:- There are various companies like S&P etc, which give credit ratings to the companies…

Q: Why do bond prices go down when interest rates go up? Don’t bond lenders like to receive high…

A: Bond price plays an important role in the trading of the bond. The amount that an investor is ready…

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: If you buy a callable bond and interest rates decline, will the value of your bond rise by asmuch as…

A: Bond valuation refers to the evaluation of bond value at any point of time, which can be used for…

Q: What are the risks associated with stocks that may not be also in bonds?

A: The question is based on the concept of different types of risk associated with different financial…

Q: What’s TRUE regarding long-term and short-term bonds (assume they have the same par value and coupon…

A: Interest Rate Risk: It is the chance of a decline in the value of security due to changes in…

Q: What impact do interest rates have on bond prices? What are the fundamental assumptions that go into…

A: SOLUTION-   A BOND IS LOAN FROM AN INVESTOR TO A BORROWER SUCH AS A COMPANY OR GOVERNMENT .THE…

Q: How do stocks and bonds differ in terms of the future payments that they are expected to make? Which…

A: Introduction: Bond is nothing but debt securities issued by a company or government if they want to…

Q: Why is there a risk of downgrading on long-term bonds?

A: Long-term bonds are usually for longer terms like 10, 20, 25 or 30 years. due to longer durations,…

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: 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: How does collateral affect the interest rate on a bond? How does subordination affect the interest…

A: The interest rate on a bond is affected by many factors like collateral, subordination, etc.

Q: What are the circumstances in which one may buy a bond certificate at a price that is higher or…

A: Bonds are issued by a company to raise finance.

Q: Explain the main premiums usually associated with bonds. How do such premiums affect bond prices?…

A: Since you have posted a question with more than three sub-parts, we will solve the first three…

Q: Why are U.S. Treasury bonds not riskless?

A: A bond is a debt instrument with which a shareholder credits cash to an entity, which can be a…

Q: Why do bonds offer lower average rates of return thanstocks?

A: Bond is a form of debt issued by government or company. When a company issues a bond, it asks the…

Q: If junk bonds are “junk,” then why do investors buythem

A: Junk bonds are a type of bond which are regarded as non-investable bonds by the credit rating…

Q: What variables influence the bond market's interest rates

A: This question explains about a variety of factors influences interest rates in the bond market.

Q: price of a long-term (longer-maturity) bond more or less sensitive to changes in interest rates than…

A: Long term bonds are more sensitive to change in interest rates than short term bond. If Interest…

Q: Explain the impact of a decline in interest rates on the present value of existing bonds.

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

Q: How is a bond’s duration impacted by varying the coupon rate? How is a bond’s duration impacted by…

A: 1. Bond duration and coupon rate have inverse relation that means if coupon rate increase then the…

Q: These are corporate bonds that have  a higher rate of return with a higher level of risk?

A: The rate of return is the expression in the percentage of the gain or loss on investment against the…

Q: When it comes to bond values, what role do interest rates play? How can you value a bond if you…

A: Introduction: Bonds are a kind of debt owed by the corporation that must be paid back. Coupon…

Q: why is yield to maturity more important than coupon rate when investing in bonds?

A: Yield to Maturity or YTM can be defined as a discount rate which provides for discounted value of…

Q: What is the market rate of interest for a bond issue that sells for more than its face value?…

A: Bonds are instruments that are issued by an entity for the purpose of financing. It is a liability…

Q: 1. What is the relationship between interest rate level and bond price? Why must this relationship…

A: 1. The interest rate and bond have an inverse relationship .when interest rate rise , the bond price…

Q: t are the advantages and disadvantages of buying bonds directly?

A: A bond is a fixed-income instrument that represents an investor's loan to a borrower (typically…

Q: Why are the bonds treated as a conservative investment? Do you think the treasury bills are…

A: Bonds: Bonds are units of corporate debt that are issued by companies and are treated as tradeable…

Q: Why are bonds' typical rates of return lower than those of stocks

A: Defined: Bonds are a kind of fixed-income instrument that represents a loan from an investor to a…

Q: What are call provisions and sinking fund provisions? Do these provisions make bonds more or less…

A: Call provision is an agreement on the bond, that the issuer of the instrument has the right to…