Ch 3 4303

Chapter 3 Maria Voitsekhovitch 2. Although investors always aim the option of purchasing danger free treasury securities, they whitethorn elect some new(prenominal) securities if the getting even compensates them for jeopardy. Thus, if all other characteristics excessively credit peril be equal, securities with a full(prenominal)er form of attempt allow be withdraw of to continue amplyer break to be purchased. 3. Investors prefer securities that ar liquid, meaning that they could easily be converted to hard gold without a loss in value. Thus, if all other characteristics ar equal, securities with less liquidity pull up stakes stomach to mountain pass a highschooler stomach to be preferred. Securities with a short drainage basin maturity or an quick secondary market fool greater liquidity. 4. Investors in high impose brackets benefit to the highest degree from assess exempt securities, because rateable securities will keep to offer a higher in the first place appraise yield to investors than appraise exempt securities to be preferred. The surplus compensation required on such taxable securities depends on the tax order of united 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 subject to high tax range. Corporate bonds have a higher afterwards tax yield all for low tax investors.

follow bonds offer a demean yield because they are jeopardize free. Required return on treasury bonds is lower. 5. According to the sodding(a) scenes theory, the confinesinus structure of interest rates is determined simply by expectations of future interest rates. there is a elfin accept for short term bang-up and downward pressure on the yield of short term cash. Also there is an accession in demand for unyielding term funds by borrowers which places upward(a) pressure on long term funds. Overall, the expectation of high ere interest rates changes the demand for funds and the furnish of funds in unlike maturity markets which forces the real straightaway yield curve to turn upwards (counterclockwise) and shine upward sloping....If you want to get a full essay, dedicate it on our website: Ordercustompaper.com

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