Question

Which of the following is not a factor in determining the required return on a bond?...

Which of the following is not a factor in determining the required return on a bond?

- Inflation rate

- Political risk

- Liquidity Risk

- Default risk

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Political risk is not a factor in determining the required return on a bond. Political risk does not affect the cash flows of the bond.

The bond price and inflation rate are inversely related to each other. Higher the inflation lower will be the bond price and vice versa.

Higher liquidity bonds attract higher prices and lower liquidity bonds attract lower prices because low liquidity is a risk.

Default risk is a major factor in bond return. If the issuer defaults, then the return on a bond can fall significantly.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following arises because long-term bond prices change more with interest rate movements than...
Which of the following arises because long-term bond prices change more with interest rate movements than short-term bond prices? a. liquidity risk b. maturity risk c. default risk d. inflation risk
The risk-free interest rate can be expressed as a function of which of the following? Real...
The risk-free interest rate can be expressed as a function of which of the following? Real rate of interest and the inflation premium Real rate of interest, inflation premium, and the default risk premium Deflation premium, real rate of interest, and the default risk premium Default risk premium, market risk premium, and the liquidity premium
For a given bond, you have the following information: Real risk-free rate (k*)=3%, inflation premium =...
For a given bond, you have the following information: Real risk-free rate (k*)=3%, inflation premium = 8%, default risk premium = 2%, liquidity premium = 2%, and maturity risk premium = 1%. What is the nominal risk-free rate (kRF)?
A 5-year Treasury bond has a 4.2% yield. A 10-year Treasury bond yields 6.7%, and a...
A 5-year Treasury bond has a 4.2% yield. A 10-year Treasury bond yields 6.7%, and a 10-year corporate bond yields 9.6%. The market expects that inflation will average 2.7% over the next 10 years (IP10 = 2.7%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...
Which of the following is NOT an important factor in determining the balance between carbon sequestration...
Which of the following is NOT an important factor in determining the balance between carbon sequestration and the return of carbon to the atmosphere? soil aggregation the type of carbon fixation pathway associated with nitrification microbial respiration and methanogenesis soil mineral content the microbial loop and viral shunt
A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.1%, and a...
A 5-year Treasury bond has a 4.8% yield. A 10-year Treasury bond yields 6.1%, and a 10-year corporate bond yields 8.45%. The market expects that inflation will average 3.75% over the next 10 years (IP10 = 3.75%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...
A 5-year Treasury bond has a 3.7% yield. A 10-year Treasury bond yields 6.4%, and a...
A 5-year Treasury bond has a 3.7% yield. A 10-year Treasury bond yields 6.4%, and a 10-year corporate bond yields 9.25%. The market expects that inflation will average 3.3% over the next 10 years (IP10 = 3.3%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...
A 5-year Treasury bond has a 4.9% yield. A 10-year Treasury bond yields 6.45%, and a...
A 5-year Treasury bond has a 4.9% yield. A 10-year Treasury bond yields 6.45%, and a 10-year corporate bond yields 8.2%. The market expects that inflation will average 1.65% over the next 10 years (IP10 = 1.65%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...
Which of the following best describes interest rate risk? The risk that a bond issuer will...
Which of the following best describes interest rate risk? The risk that a bond issuer will default on the promised coupon payments of a bond. The risk that the periodic coupon payments received from a bond cannot be reinvested at the same rate of return. The inverse relationship between changes in interest rates and the price of a fixed income security. The risk that the purchasing power of periodic coupon payments received will diminish over a long period of time.
A 5-year Treasury bond has a 3.25% yield. A 10-year Treasury bond yields 6.1%, and a...
A 5-year Treasury bond has a 3.25% yield. A 10-year Treasury bond yields 6.1%, and a 10-year corporate bond yields 8.5%. The market expects that inflation will average 2.1% over the next 10 years (IP10 = 2.1%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities:...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT