Corporate bond interest rates
[DOC File]The Term Structure of Interest Rates
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Rn = actual current rate for the bond of maturity N. N = term to maturity. tR1 = current one year rate. t+1r1 = one year rate expected to hold at some future time t + 1 Future interest rates are implicit in today’s actual or observed interest rates for different maturities. The expectations hypothesis can explain any shape of the yield curve:
Chapter 7
[LO 1] At the beginning of his current tax year, Eric bought a corporate bond with a maturity value of $50,000 from the secondary market for $45,000. The bond has a stated annual interest rate of 5 percent payable on June 30 and December 31, and it matures in five years on December 31.
[DOC File]1) The term structure of interest rates is
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Municipal bond interest rates increase relative to corporate bond interest rates when. income taxes are increased. corporate bonds become riskier. Treasury securities become more widely traded. there is a major default in the municipal bond market. all of the above occur.
[DOC File]Iowa State University
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An 8-year corporate bond has a yield of 8.3%. Assume that the liquidity premium on the corporate bond is 0.75%. What is the default risk premium on the corporate bond? r = r* + IP + MRP + DRP + LP. ... Interest rates on 4-year Treasury securities are currently 7%, while interest rates on 6-year Treasury securities are currently 7.5%. ...
[DOC File]Finance 303 – Financial Management
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37. Keeping other things constant, if market interest rates rise, the current yield (CY) for a bond will (b) decrease. increase. not change. All of the above are possible. None of the above can happen. (If market interest rates rise, bond prices will fall. As a result, CY will rise) 38.
[DOC File]Interest, Present Value, and Yield Curves
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Interest rates R and r are in inverse years (e.g., 0.05 per year). Other time units can be used. But the convention that interest rates are in units of inverse years is so strong that analysts will express interest rates in units of “per year” even if other parts of a problem use different time periods.
[DOC File]Quantitative Problems Chapter 5
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6. 1-year T-bill rates are expected to steadily increase by 150 basis points per year over the next 6 years. Determine the required interest rate on a 3-year T-bond and a 6-year T-bond if the current 1-year interest rate is 7.5%. Assume that the Pure Expectations Hypothesis for interest rates holds. Solution: 3 year bond: year 1 interest rate 7.5%
[DOC File]Interest Rate Risk of Corporate Bonds
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Dec 06, 2006 · When the interest rate risk of a corporate bond is known, it can be used to hedge the interest rate risk of a portfolio that contains corporate bonds. This can be done by using the hedge ratio. In the current practice there is a difference between investment grade bonds and high yield bonds.
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