Let's say that the data shows how the spread between the interest rates on corporate bonds and U.S. treasury bonds has been very large during the Covid - 19 pandemic . What would explain this difference ? Use the bond supply and demand analysis to answer this question . Be as specific as you can be and make sure you explain the channels clearly?

Let's say that the data shows how the spread between the interest rates on corporate bonds and U.S. treasury bonds has been very large during the Covid - 19 pandemic . What would explain this difference ? Use the bond supply and demand analysis to answer this question . Be as specific as you can be and make sure you explain the channels clearly?

International Financial Management

14th Edition

ISBN:9780357130698

Author:Madura

Publisher:Madura

Chapter18: Long-term Debt Financing

Section: Chapter Questions

Problem 4ST

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Which of the following statements is CORRECT? a. If the Federal Reserve unexpectedly announces that it expects inflation to increase, then we would probably observe an immediate increase in bond prices. b. The total yield on a bond is derived from dividends plus changes in the price of the bond. c. Bonds are generally regarded as being riskier than common stocks, therefore bonds have higher required returns. d. Bonds issued by larger companies always have lower yields to maturity (due to less risk) than bonds issued by smaller companies. e. The market price of a bond will always approach its par value as its maturity date approaches, provided the bond's required return remains constant. THE ANSWER IS NOT E OR B, apparently, but please let me know if you really think one of those choices are correct.
Please describe the different type of bonds and compare the yields associated with each type of bonds?Which factors influence the yield of each type of bonds? Which type of bond is associated with the lowest yield/interest rate out of all outstanding bonds during a particular time period? How the Fed could influence the bond yields? Would you expect bond yields/interest rates to be negative in either nominal or real terms? If so, can you provide such an example?
Give typing answer with explanation and conclusion Consider the prevailing condition of inflation (including changes in global oil price), the economy, budget deficit, decreases in expected remittance inflow, and the central bank monetary policy that could affect interest rate. Based on the prevailing conditions do you think bond price will increase or decreases in next six-month period. In the real economic environment which other factors may affect the bond price? Which factor in your opinion will have biggest impact on bond price? Assess the above given situations.
If the Federal Reserve Bank (FRB) announces a change by increasing the Federal Funds rate, this will cause: Group of answer choices A. Bond prices to rise, bond yields to rise C. Bond prices to rise, bond yields to fall B. Bond prices to fall, bond yields to fall D. Bond prices to fall, bond yields to rise
if we see an increase in default rates, what may that mean for the junk bond market and for companies that want/need to sell more junk bonds?
In the early 1980s, at a time when interest rates were at historical highs, investment banking firms introduced a security backed by US government bonds that paid no annual interest (referred to as zero-coupon bonds), with all of the interest to be paid at the bonds’ maturity date. The securities were given names such as TIGRS (Treasury Income Growth Receipts, a Merrill Lynch product), CATS (Certificates of Accrual on Treasuries, a Salomon Brothers product), and LIONS (Lehman Investment Opportunity Notes, a Lehman Brothers product). Why do you think securities with this feature were introduced at that time? Too often it was stated that these securities had no risk. What risks does an investor face when purchasing such securities?
For each of the following events, explain what the impact would be on the yield-to-maturity: The bond is downgraded by a rating agency. The economy seems to be shifting from a recession to a boom economy. The bond is subordinated to other bonds. Congressional hearings provide pressure on Matthew to significantly reduce the price on several of their products
1. When the Fed purchases treasuries to supply market liquidity, does that increase, decrease, or have no effect on the credit spread for a corporate bond?
What will happen to the price of bonds, quantity of bonds and interest rate if bonds become riskier than stocks and the government starts spending more than their tax revenue? Show this on a graph.
You believe that the spread between municipal bond yields and U.S. Treasury bond yields is going to narrow in the coming month. How can you profit from such a change using the municipal bond and T-bond futures contracts?
National governments issue debt securities known as sovereign bonds, which can be denominated in either local currency or global reserve currencies, like the U.S. dollar or euro. For this discussion question, first define what these bonds are. Why are these issued? Then discuss the issues that can arise when investors invest in these types of bonds. What are the advantages and disadvantages of these bonds? Are there unique issues that can arise only with this type of bond? Would you invest in sovereign bonds?
Suppose that the central bank sells government bonds. Use a graph of the money market to show what this does to the value of money and price level.