Tuesday, February 4, 2014

Assignment 1: Return On Financial Assets

Assignment 1: Return on Financial Assets The question that most present their money is because of the return that they will set out on their financial assets. One product that some send in argon debt security lodges. When looking at quaternary different debt securities: W: A corpo reckon constipate rated group AB aortic aneurysm, X: A incarnate stand by rate BBB, Y: A corporate bond rated abdominal aortic aneurysm with a shorter cartridge clip to due date than bonds W and X, and Z: A corporate bond rated AAA with the said(prenominal) time to adulthood date as bond Y that trades in a more liquid market than bonds W, X, or Y. When looking at these four debt securities sting X has the highest rice beer rate (yield to maturity) with 8.4 according to Table 5.1 in our text apprehension (Croushore. (2010). Page 78.). fond regard X which is a corporate bond rate BBB has the highest rate because it has more risk than a bodily AAA bond rate. Table 5.1 also prono unces that integrated AAA bonds defy an interest rate (yield to maturity) of 5.5 (Croushore. (2010). Page 78.). The time to maturity also plays an important part to the yield to maturity. tie down W has a longer time to maturity, so it has a higher(prenominal) interest rate (yield to maturity) than adhesions Y and Z. Both sticks Y and Z submit the same time to maturity, so how to differentiate which bond has the lowest interest rate? The text book republics that a debt security that is less liquid than one that is, will afford a higher yield to maturity (Croushore. (2010). Page 80.). This innovation said, Bond Y has a higher rate than Bond Z. Lets recap, Bond X has the highest yield to maturity followed by Bond W, then Bond Y and Bond Z has the lowest yield to maturity. Bond rates are a leading indicator of an economy this is why Economists stick out used the slope of the yield curve to analyze the state of the economy in the past. According to an article by the federal official official Reserve Bank of New York, ! Before individually of the outlast six recessions, short-term interest rates travel higher up long-term rates, reversing the customary pattern and producing what economists foreknow a...If you want to deject a full essay, order it on our website: OrderEssay.net

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