ECON ~ about Saving and investment

＊Ｍrs Ｂmw ＊

2007-10-15 10:22 pm

For each of the following pairs, which bond would you expect to pay a higher
interest rate ?

a) a bind of the U.S. government or a bond of an east european government
b) a bond that repays the principal in year 2005 or a bond that repays the principal in year 2025
plx give me the point form
and it must be answer in english ~

回答 (1)

用戶22404

2007-10-16 12:23 am

✔ 最佳答案

(a) An east European Government should offer higher interest rate than US government because it has lower credit rating or higher default probability and lower liquidity than US government.
(b)Bond with maturity at 2025 as it has longer maturity date than the one matured at 2005, according to liquidity reason and normal upward sloping yield curve, 2025 bond should offer higher interest rate than the shorter one.
(c) Coca-Cola being an well established multinational company should has higher credit rating or lower default risk than the software company you run in garage, hence, your software company should offer higher interest rate.
(d) Federal government bonds have better credit rating and higher liquidity than New York state's bond, hence, New York state bond should offer higher yield than Federal government bonds.

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