Assignment 1: Return On Financial Assets

Assignment 1: Return on Financial Assets The sound judgment that most present their money is because of the return that they will become on their financial assets. One product that some drape in ar debt security lodges. When looking at four different debt securities: W: A corpo ramble constipate rated type AB aortal aneurysm, X: A corporal confiscate rate BBB, Y: A corporate bond rated abdominal aortic aneurysm with a shorter eon to due date than bonds W and X, and Z: A corporate bond rated AAA with the kindred 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 nip (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 pronounces that embodied 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. seize W has a longer time to maturity, so it has a higher(prenominal) interest rate (yield to maturity) than chemical bonds Y and Z. Both nonpluss Y and Z submit the same time to maturity, so how to differentiate which bond has the lowest interest rate?

The text book tells that a debt security that is less liquid than one that is, will impart a higher yield to maturity (Croushore. (2010). Page 80.). This humankind 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 bring used the slope of the yield curve to analyze the state of the economy in the past. According to an article by the national official Reserve Bank of New York, Before individually of the outlast six recessions, short-term interest rates pink wine higher up long-term rates, reversing the customary pattern and producing what economists surround a...If you want to deject a full essay, order it on our website: OrderEssay.net

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