Return On Financial Assets

Return of Financial Assets Michelle Clayton ECO320 Money and Banking Professor Melvin Landry May 1, 2011 waver 1 Consider the following four debt securities, which ar selfsame(a) in every characteristic except as say: W: A somatic bond rated abdominal aortal aneurysm X: A bodied bond rated BBB Y: A corporate bond rated AAA with a shorter judgment of conviction to adulthood than bonds W and X Z: A corporate bond rated AAA with the same clipping to maturity as bond Y that trades in a to a greater extent liquefiable market than bonds W, X, or Y. List the bonds in the close to likely vagabond of the involution rates (yield to maturity) of the bonds from highest to lowest. beg off your work. in that respect ar several factors that affect the interest rates of securities. These factors argon essay, liquidity, taxation and time to maturity. When a affiance department involves to a greater extent risk the investors atomic number 18 compensated by higher(p renominal) rates. This is to make the auspices more pleasing to the investor. incorporated rated bonds that transmit the AAA paygrade are more often than not a safer security with lower risk. The more liquid a security is the more attractive it is to investors. If a security is liquid that means that it carries with it slight transaction costs.

Investors are therefore fire in more liquid securities, however, less liquid securities carry a higher return to stimulate the investors to choose them everywhere more liquid securities. Many investors give accept a lower interest rate on securities that are not taxed. For example, the in terest rate on a local political sympathies! security is generally lower because the security is not taxed. Corporate bonds are taxed so the rates are generally higher. Finally, the time to maturity greatly affects interest rates. To captivate investors to invest in protracted termed securities the interest rate is higher on securities with longer terms. Taking all of the above tuition into account, the securities would be graded from highest to lowest in this order; X, W, Y and Z. The rating of BBB puts that security as the...If you want to get a full essay, order it on our website: BestEssayCheap.com

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