Yield curve is downward sloping

Assignment Help Financial Management

Reference no: EM13814607

If the yield curve is downward sloping, which of the following statements is correct? (hint: graph the yield curves for a T- bond, a AAA bond, and a B bond)

a) The yield on the 10-year T-bond must be less than the yield on a 2-year T-bond.

b) The yield on the 5-year T-bond must exceed the yield on the 10-year AAA corporate bond.

c) The yield on the 5-year AAA corporate bond must exceed the yield on 5-year B corporate bond.

d) The yield on the 5-year AAA corporate bond must be lower the yield on the 5-year T-bond.

e) The yield on the 5-year T-bond must exceed the yield on the 5-year AAA corporate bond.

Reference no: EM13814607

Questions Cloud

Analyzing and explaining the effects of a stock split : On March 1 of the current year, Zhang Company has 500,000 shares of $20 par value common stock that are issued and outstanding. Its balance sheet shows the following account balances relating to common stock. How many shares of common stock are issue..

What is your return rate in one year : Last year, you purchased a $1,000 par value bond with a 7.5% annual coupon and a 20-year maturity. At the time of the purchase, it had an expected YTM of 8%. After receiving the coupon, you sold the bond today for $930. What is your return rate in on..

What is the expected bond value : Consider a $1,000 par value bond with a 7% annual coupon. The bond pays interest annually. There are 20 years remaining until maturity. You have expectations that in 5 years the YTM on a 15-year bond with similar risk will be 7.5%. What is the expect..

Find out what is the nominal yield to maturity first : A bond with a face value of $1,000 matures in 9 years and has a 7% semi annual coupon. The bond currently sells for $846. You would pay $846 for each bond if you think that a “fair” market interest rate (discount rate) for such bonds is ____.

Yield curve is downward sloping : If the yield curve is downward sloping, which of the following statements is correct? (hint: graph the yield curves for a T- bond, a AAA bond, and a B bond)

Calculate the accounting break-even point : We are evaluating a project that costs $1,160,000, has a ten-year life, and has no salvage value. Assume that depreciation is straight-line to zero over the life of the project. Calculate the accounting break-even point. What is the degree of operati..

New manufacturing plant and equipment to actually produce : Consider a project to supply 109 million postage stamps per year to the U.S. Postal Service for the next five years. You have an idle parcel of land available that cost $1,990,000 five years ago; if the land were sold today, it would net you $2,190,0..

Calculate the payback period and the NPV : McGilla Golf has decided to sell a new line of golf clubs. The clubs will sell for $840 per set and have a variable cost of $440 per set. The company has spent $154,000 for a marketing study that determined the company will sell 58,000 sets per year ..

When an investor considers maximizing expected returns : The possibility of political risk may be excluded when an investor considers maximizing expected returns. Eurobond issues are denominated in the currency where the bond issue is sold. Disclosure requirements in the Eurobond market are much less strin..

User Account

All Pages