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1. Why do short-term debt securities issued by private companies generally offer higher yields than treasury bills issued by central governments?
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- 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 types of advantages or expertise should an investment bank have to be competitive in the corporate bond market? What different types of advantages or expertise should it have to be competitive in the Treasury bond market? Why?Does a large national debt impact the stock market?
- when are corporations likely they called the Bonds? A. When the market interest rate is higher than the contract rate, b. When the contract rate is higher than the market rate. C. When their bonds at selling at par with market d. When standard and poor are bullish about treasury bills E. None of the aboveTreasury bills typically provide higher average returns, both in nominal terms and in real terms, than long-term government bonds. True or False1. How would you define corporatebonds? Explain in your own wordswhat Bonds issued at Par, at aDiscount, and at a Premium are.2. How would you explain thedifference between bank loans andissuing corporate bonds? In youropinion, which of the fundingmethods is more attractive to acompany?
- Explain the interest rate sensitivity of government debt as a function of: i) its maturity and ii) the level of coupon it pays.1. When inflation increases, does that increase, decrease, or have no effect on the credit spread for a corporate bond?Interest rate risk is of concern to a firm's financial officer, because (Select the best choice below.) A. it is more difficult to issue securities when interest rates are low. B. changes in interest rates affect the expected return of financial instruments. C. federal government taxation increases as interest rates rise, reducing the cash available to the firm. D. inflationary periods may reduce the real earnings of the firm. E. B and D
- You are working for a mid-sized company that is looking to estimate its cost of debt. The company has never had an issuance in the bond market. What would be the best proxy to estimate its cost of debt? A. Cost of its bank debt B. Cost of its equity C. Cost of debt from companies of a similar market capitalization D. Cost of debt in the corporate bond marketProvide an explanation of whether it is advantageous for a bank to classify debt investments as “held to maturity “or “available for sale” if the required return by the market declines? What impact will this have on the bank's balance sheet and net income?2. If a bank wants to avoid volatility in its regulatory capital, which investment classification would be the most desirable, and which investment classification would be the least desirable? Does your answer differ depending on whether the bank is large or small? In other words, do large and small banks differ on how they can categorize unrealized gains/losses on AFS debt?