Which bond would you expect to pay a higher interest rate
For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 2040 c. a bond from Coca-Cola or a bond from a software company you run in your garage d. a bond issued by the federal government or a bond issued by New York State A stock is a share in the ownership, equity, of a company. A bond is a debt that the company must pay back. All of the above are correct. The equilibrium point is E1. The equilibrium interest rate is 6%, and the equilibrium loanable funds is $50 billions. For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 2040 c. a bond from Coca-Cola or a bond from a software company you run in your garage d. a bond issued by the federal government or a bond issued by New York State Best Answer: a. The US bond, because there is much more confidence in the ability of the US government to honour its debt commitments. b. the bond that matures (repays) in 2030, because you need to pay a higher interest rate in order to justify holding someones money for a longer period of time. While you own the bond, the prevailing interest rate rises to 7% and then falls to 3%. 1. The prevailing interest rate is the same as the bond's coupon rate. The price of the bond is 100, meaning that buyers are willing to pay you the full $20,000 for your bond. We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that Select one: a. the credit risk associated with Bond A is lower than the credit risk associated with Bond B. b. Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. The 20-year bond would likely pay a higher interest rate than would the 6-month bill. The future is uncertain and therefore more risky for a 20-year bond than for a 6-month bill.
t = maturity (period of the bond). you sell the bond, and get your money back of the following pairs, which bond would you expect to pay a higher interest rate?
While you own the bond, the prevailing interest rate rises to 7% and then falls to 3%. 1. The prevailing interest rate is the same as the bond's coupon rate. The price of the bond is 100, meaning that buyers are willing to pay you the full $20,000 for your bond. We would expect the interest rate on Bond A to be higher than the interest rate on Bond B if the two bonds have identical characteristics except that Select one: a. the credit risk associated with Bond A is lower than the credit risk associated with Bond B. b. Bond A was issued by the city of Philadelphia and Bond B was issued by Red Hat Corporation. The 20-year bond would likely pay a higher interest rate than would the 6-month bill. The future is uncertain and therefore more risky for a 20-year bond than for a 6-month bill. Step 1 of 5 a) The bond of an eastern European government would likely to pay a higher interest rate than the bond of the government because there would be a greater risk of default perceived from the bonds of Eastern European government. A longer-maturity bond will normally pay a higher interest rate than a shorter-maturity bond in order to entice investors who would rightly be concerned about the possibility of a) interest rate risk, and b) inflation risk.
30 Oct 2019 For consumers, lower rates do mean cheaper loans, which can impact your mortgage, home equity loan, credit card, student loan tab and car payment. On the flip side, you'll earn less interest on savings accounts and, in some “In this case, a Fed rate cut would not be very good” for savers or borrowers,
1 Answer to Hi: Which bond would you expect to pay a higher interest rate? Explain why. US Government/East European Coca-Cola-company run from your garage Issued by federal or state bond Thank you - 188806 Question: For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the Canadian government or a bond of an East European government For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government. b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 2040. c. a bond from Coca-Cola or a bond from a software company you run So, higher interest rates mean lower prices for existing bonds. If interest rates decline, however, bond prices of existing bonds usually increase, which means an investor can sometimes sell a bond for more than the purchase price, since other investors are willing to pay a premium for a bond with a higher interest payment, also known as a coupon. For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain a. a bond of the Singapore government or a bond of an Indonesian government b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 3. 2040 a bond from Unilever Company or a bond from a software company you run in your c. garage The following information
1 Answer to Hi: Which bond would you expect to pay a higher interest rate? Explain why. US Government/East European Coca-Cola-company run from your garage Issued by federal or state bond Thank you - 188806
For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 2040 c. a bond from Coca-Cola or a bond from a software company you run in your garage d. a bond issued by the federal government or a bond issued by New York State Best Answer: a. The US bond, because there is much more confidence in the ability of the US government to honour its debt commitments. b. the bond that matures (repays) in 2030, because you need to pay a higher interest rate in order to justify holding someones money for a longer period of time.
For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. a. a bond of the U.S. government or a bond of an Eastern European government. b. a bond that repays the principal in year 2020 or a bond that repays the principal in year 2040. c. a bond from Coca-Cola or a bond from a software company you run
To understand the careful attention that bond investors pay to interest rates, we If a manager is worried about rising interest rates, he or she might decide that a If you would like to learn more, keep exploring our other fixed income articles, Some ways to lower your interest rate include paying a bigger deposit on the home When applying for a bond, one of your most important goals should be to Why do bond prices and interest rates move in opposite directions? issue bonds if doing so would cause them to pay a higher interest rate than if they were to Know how bond fund returns can help you profit in a rising interest rate to the issuers of bonds would increase as they need to pay higher interest or coupon. Thus, shorter maturity bonds are in demand when interest rates are expected to So if you own a bond that is paying a 3% interest rate (in other words, yielding 3 %) and a duration of five years and interest rates increase by 1%, the bond's price will decline If, for example, you expect rates to rise, it may make sense to focus on Investors should be urged to consult their tax professionals or financial Learn why interest rates affect the price of bonds, and how you can take a This is the maximum that investors would be willing to pay for the bond based on its to the lower cash flows that investors could expect from the newer bond. New bonds paying higher interest rates mean existing bonds with lower rates are bond, since they could buy a newer bond that would pay them more interest.
10 Apr 2018 There is another important variable that you are leaving out of this equation: credit rating. So for the sake of this discussion let's assume that all t = maturity (period of the bond). you sell the bond, and get your money back of the following pairs, which bond would you expect to pay a higher interest rate? 2. Which bond would you expect to pay a higher interest rate? (1) A bond of the Canadian government (2) A bond from Coca-Cola (3) A bond from a software Let's say you have $100 in a savings account that pays a 1% interest rate. But if the rate of inflation is running at 2%, you would need $102 to have the same buying power An automaker may be forced to pay more for parts and will pass that increase along to the consumer. Hedge Your Bets with Inflation-Linked Bonds. Banks charge borrowers a slightly higher interest rate than they pay stay in the house for 8.5 years, you would be better off taking the higher interest rate. such as taking out a loan, choosing credit cards, and investing in stocks or bonds.