Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
14th Edition
ISBN: 9780133508079
Author: Gitman
Publisher: PEARSON
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Chapter 15.5, Problem 15.21RQ
Summary Introduction
Todetermine: The characterstics to make a security marketable. To find the yeilds on non government marketable securities usually higher than the yeilds on government issues with same maturities.
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Students have asked these similar questions
Are risk-free rates really risk free?What are the risks of government securities?Why do we still use government bond yields as our risk-free rates if they still carry risk?
Why are U.S. government securities viewed differently from state and local government securities in terms of default risk?
Which of the following is most true?
The nominal rate of a government long-term security can be used as a proxy for the real risk free rate.
A direct relationship is exhibited between the investors’ willingness to supply funds and the interest rates of securities.
Finance managers tend to favor more on long-term financing if the nation’s Gross Domestic Product is expected to contract.
Maturity risk premium is always included in the nominal rate of any corporate security since corporations are perceived as less riskier than government.
Chapter 15 Solutions
Principles of Managerial Finance (14th Edition) (Pearson Series in Finance)
Ch. 15.1 - Why is working capital management one of the most...Ch. 15.1 - Prob. 15.2RQCh. 15.1 - Prob. 15.3RQCh. 15.2 - Prob. 15.4RQCh. 15.2 - Prob. 15.5RQCh. 15.2 - What are the benefits, costs, and risks of an...Ch. 15.2 - Prob. 15.7RQCh. 15.3 - Prob. 1FOPCh. 15.3 - Prob. 15.8RQCh. 15.3 - Briefly describe the following techniques for...
Ch. 15.3 - Prob. 15.10RQCh. 15.4 - Prob. 15.11RQCh. 15.4 - Prob. 15.12RQCh. 15.4 - What are the basic tradeoffs in a tightening of...Ch. 15.4 - Prob. 15.14RQCh. 15.4 - Prob. 15.15RQCh. 15.4 - Prob. 15.16RQCh. 15.5 - Prob. 1FOECh. 15.5 - Prob. 15.17RQCh. 15.5 - What are the firms objectives with regard to...Ch. 15.5 - Prob. 15.19RQCh. 15.5 - Prob. 15.20RQCh. 15.5 - Prob. 15.21RQCh. 15 - Prob. 1ORCh. 15 - EOQ analysis Thompson Paint Company uses 60,000...Ch. 15 - Learning Goal 4 ST15- 3 Relaxing credit standards...Ch. 15 - Prob. 15.1WUECh. 15 - Learning Goal 2 E15-2 Icy Treats Inc. is a...Ch. 15 - Prob. 15.3WUECh. 15 - Forrester Fashions has annual credit sales of...Ch. 15 - Prob. 15.1PCh. 15 - Learning Goal 2 P15-2 Changing cash conversion...Ch. 15 - Prob. 15.5PCh. 15 - EOQ, reorder point, and safety stock Alexis...Ch. 15 - Prob. 15.7PCh. 15 - Prob. 15.8PCh. 15 - Prob. 15.9PCh. 15 - Relaxation of credit standards Lewis Enterprises...Ch. 15 - Initiating an early payment discount Gardner...Ch. 15 - Prob. 15.12PCh. 15 - Lengthening the credit period Parker Tool is...Ch. 15 - Prob. 15.14PCh. 15 - Prob. 15.15PCh. 15 - Prob. 15.16PCh. 15 - Prob. 15.18P
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- In what ways do investors quantify the risk levels between domestic and foreign securities?arrow_forwardNominal interest rates are the rates stated or quoted in the terms or contract of a particular security. Which is false about the factors that influences nominal interest rates? a. Government issued securities will only include maturity risk premium if the security is a long-term one b. The liquidity risk premium which is present in all corporate securities are used to compensate investors for the possibility of difficulty in converting the security into cash c. The short-term government securities do not have a real risk-free rate component d. Regardless of whether issued by the government or corporation, nominal rates have inflation premiumsarrow_forwardHow can investors estimate the risks associated with local and international securities?arrow_forward
- What are treasury inflation-protected securities (TIPS)?arrow_forwardHow do investors estimate the risk of domestic vs overseas securities?arrow_forwardNominal interest rates are the rates stated or quoted in the terms or contract of a particular security. Which is false about the factors that influences nominal interest rates? Regardless of whether issued by the government or corporation, nominal rates have inflation premiums The liquidity risk premium which is present in all corporate securities are used to compensate investors for the possibility of difficulty in converting the security into cash Government issued securities will only include maturity risk premium if the security is a long-term one The short-term government securities do not have a real risk-free rate componentarrow_forward
- In addition to default risk, what key risk do investors in foreign bonds face? Explain.arrow_forwardQuoted interest rates are rates stated in the tenor or contract of a particular security. All of the following are true about quoted rates, except: Nominal rates for both government and corporate issued securities have inflation premiums. The liquidity risk premium is used to compensate investors for the possibility of difficulty in converting the security into cash The short-term government securities do not possess any liquidity risk All long-term securities, regardless of the issuing entity, possess risk of changes in prices reflected in the presence of default risk premiumarrow_forwardSecurities exchanges create efficient markets that do all of the following EXCEPT control the supply and demand for securities through price. allocate funds to the most productive uses. allow the price to be determined by supply and demand of securities. ensure a market in which the price reflects the true value of the security.arrow_forward
- Why are the bonds treated as a conservative investment? Do you think the treasury bills are risk-free assets?arrow_forwardWhich of the following is the basis for fixing the price of securities in the financial market? a. Government b. Demand and Supply in the Market c. Seller of the Financial Instrument d. The issuer of the Instrumentsarrow_forwardFrom a practical standpoint, how do international markets differ from domestic markets? What role do international securities play in a corporate portfolio? In what ways do investors quantify the risk levels between domestic and foreign securities? What asset allocation strategies and weightings would you consider when investing in international securities? Explain your reasoning.arrow_forward
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