Questions from Financial Markets

Q: Consider the decision to purchase either a five-year corporate bond

Consider the decision to purchase either a five-year corporate bond or a five-year municipal bond. The corporate bond is a 12% annual coupon bond with a par value of $1,000. It is currently yielding 1...

Q: One-year T-bill rates are expected to steadily increase

One-year T-bill rates are expected to steadily increase by 150 basis points per year over the next six years. Determine the required interest rate on a three-year T-bond and a six-year T-bond if the c...

Q: Which bond would produce a greater return if the expectations theory were

Which bond would produce a greater return if the expectations theory were to hold true, a two-year bond with an interest rate of 15% or two one-year bonds with sequential interest payments of 13% and...

Q: One-year T-bill rates are 2% currently.

One-year T-bill rates are 2% currently. If interest rates are expected to go up after three years by 2% every year, what should be the required interest rate on a 10-year bond issued today? Assume tha...

Q: How does an increase in the value of the pound sterling affect

How does an increase in the value of the pound sterling affect American businesses?

Q: One-year T-bill rates over the next four years

One-year T-bill rates over the next four years are expected to be 3%, 4%, 5%, and 5.5%. If four-year T-bonds are yielding 4.5%, what is the liquidity premium on this bond?

Q: If the interest rates on one- to five-year bonds

If the interest rates on one- to five-year bonds are currently 4%, 5%, 6%, 7%, and 8%, and the term premiums for one- to five-year bonds are 0%, 0.25%, 0.35%, 0.40%, and 0.50%, predict what the one-ye...

Q: Government economists have forecasted one-year T-bill rates for

Government economists have forecasted one-year T-bill rates for the following five years, as follows: Year………………1-year rate 1…………………………..4.25% 2…………………………..5.15% 3………………………….5.50% 4………………………….6.25% 5...

Q: How does the after-tax yield on a $1,

How does the after-tax yield on a $1,000,000 municipal bond with a coupon rate of 8% paying interest annually compare with that of a $1,000,000 corporate bond with a coupon rate of 10% paying interest...

Q: Debt issued by Southeastern Corporation currently yields 12%. A municipal bond

Debt issued by Southeastern Corporation currently yields 12%. A municipal bond of equal risk currently yields 8%. At what marginal tax rate would an investor be indifferent between these two bonds?