Questions from Financial Markets

Q: The one-year interest rate over the next 10 years will

The one-year interest rate over the next 10 years will be 3%, 4.5%, 6%, 7.5%, 9%, 10.5%, 13%, 14.5%, 16%, and 17.5%. Using the expectations theory, what will be the interest rates on a three-year bond...

Q: If a yield curve looks like the one shown here, what

If a yield curve looks like the one shown here, what is the market predicting about the movement of future short-term interest rates? What might the yield curve indicate about the marketâ€&...

Q: If a yield curve looks like the one below, what is

If a yield curve looks like the one below, what is the market predicting about the movement of future short-term interest rates? What might the yield curve indicate about the market’...

Q: What effect would reducing income tax rates have on the interest rates

What effect would reducing income tax rates have on the interest rates of municipal bonds? Would interest rates of Treasury securities be affected and, if so, how?

Q: Risk premiums on corporate bonds are usually anticyclical; that is,

Risk premiums on corporate bonds are usually anticyclical; that is, they decrease during business cycle expansions and increase during recessions. Why is this so?

Q: How can changes in foreign exchange rates affect the profitability of financial

How can changes in foreign exchange rates affect the profitability of financial institutions?

Q: Predict what will happen to interest rates on a corporation’s bonds if

Predict what will happen to interest rates on a corporation’s bonds if the federal government guarantees today that it will pay creditors if the corporation goes bankrupt in the future. What will happ...

Q: Predict what would happen to the risk premiums on corporate bonds if

Predict what would happen to the risk premiums on corporate bonds if brokerage commissions were lowered in the corporate bond market.

Q: If the income tax exemption on municipal bonds were abolished, what

If the income tax exemption on municipal bonds were abolished, what would happen to the interest rates on these bonds? What effect would it have on interest rates on U.S. Treasury securities?

Q: Which should have the higher risk premium on its interest rates,

Which should have the higher risk premium on its interest rates, a corporate bond with a Moody’s Baa rating or a corporate bond with a C rating? Why?