Ch 3 4303

Chapter 3 Maria Voitsekhovitch 2. Although investors always drive the option of purchase danger free treasury securities, they may elect more or less new(prenominal) securities if the retort compensates them for jeopardy. Thus, if all former(a) characteristics besides credit let out be equal, securities with a full(prenominal)er degree of risk allow be possessed of to continue higher(prenominal) yield to be purchased. 3. Investors like securities that are liquid, meaning that they could easily be converted to lumbering cash without a loss in value. Thus, if all other characteristics are equal, securities with less liquidity will affirm to aver a higher yield to be preferred. Securities with a slight landmark maturity or an active secondary commercialize have greater liquidity. 4. Investors in high impose brackets gain to the highest degree from assess exempt securities, because appraiseable securities will have to offer a higher originally tax yie ld to investors than tax exempt securities to be preferred. The extra compensation necessitate on such taxable securities depends on the tax judge of undivided and institutional investors. Corporate bonds have higher before tax yield, they are taxable by the federal government. municipal bonds have higher tax yield for investors who are matter to high tax rates. Corporate bonds have a higher afterwards tax yield only for low tax investors.

respect bonds offer a lower yield because they are risk free. Required return on treasury bonds is lower. 5. check to the sodding(a) expectations theory, the destination s tructure of interest rates is de endpointine! d only by expectations of future interest rates. There is a elvish demand for short term capital and downward blackmail on the yield of short term cash. Also in that location is an increase in demand for long term monetary resource by borrowers which places upward pressure on long term gold. Overall, the expectation of high ere interest rates changes the demand for funds and the supply of funds in different maturity markets which forces the accredited flat yield curve to pivot upwards (counterclockwise) and sheen upward sloping....If you want to get a full essay, order it on our website: BestEssayCheap.com

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