Questions from Financial Markets

Q: Suppose that Treasury bills are currently paying 9 percent and the expected

Suppose that Treasury bills are currently paying 9 percent and the expected inflation is 3 percent. What is the real interest rate?

Q: You are interested in a bond that pays an annual coupon of

You are interested in a bond that pays an annual coupon of 4 percent, has a yield to maturity of 6 percent and has 13 years to maturity. If interest rates remain unchanged, at what price would you exp...

Q: a. How would the present value (and therefore the market

a. How would the present value (and therefore the market value) of a bond be affected if the coupon payments are smaller and other factors remain constant? b. How would the present value (and therefor...

Q: Does an analyst employed by a securities firm to rate firms face

Does an analyst employed by a securities firm to rate firms face a conflict of interest? If so, can the conflict be resolved?

Q: Explain why a stimulative monetary policy might not be effective during a

Explain why a stimulative monetary policy might not be effective during a weak economy in which there is a credit crunch.

Q: Determine how the bond elasticity would be affected if the bond price

Determine how the bond elasticity would be affected if the bond price changed by a larger amount, holding the change in the required rate of return constant.

Q: Determine how the duration of a bond be affected if the coupons

Determine how the duration of a bond be affected if the coupons were extended over additional time periods.

Q: Assume the following information for existing zero-coupon bonds:

Assume the following information for existing zero-coupon bonds: Par value = $100,000 Maturity = 3 years Required rate of return by investors = 12% How much should investors be willing to pay for thes...

Q: Assume that you require a 14 percent return on a zero-

Assume that you require a 14 percent return on a zero-coupon bond with a par value of $1,000 and six years to maturity. What is the price you should be willing to pay for this bond?

Q: Spartan Insurance Company plans to purchase bonds today that have four years

Spartan Insurance Company plans to purchase bonds today that have four years remaining to maturity, a par value of $60 million, and a coupon rate of 10 percent. Spartan expects that in three years, th...