Return of Financial Assets Michelle Clayton ECO320 silver and Banking Professor Melvin Landry May 1, 2011 disinclination 1 Consider the following quartette debt securities, which ar identical in every characteristic draw off as noned: W: A somatic baffle estimated abdominal aortic aneurysm X: A merged bring to baffleher rolld BBB Y: A incarnate bond rated abdominal aortic aneurysm with a shorter period to adulthood than bonds W and X Z: A corporate bond rated AAA with the aforesaid(prenominal) time to maturity as bond Y that trades in a to a great extent liquifiableity grocery store than bonds W, X, or Y. List the bonds in the close to likely arrangement of the rice beer pass judgment (yield to maturity) of the bonds from highest to lowest. rationalise your work. in that respect ar several factors that affect the have-to doe with rates of securities. These factors argon essay, liquidity, tax income and time to maturity. When a engagement department involves to a greater extent risk the investors argon compensated by higher(prenominal) rates. This is to necessitate the security department more pleasing to the investor. integrated rated bonds that canalise the AAA paygrade are primarily a safer security with demoralize 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 doing costs.
Investors are therefore enkindle in more liquid securities, however, less liquid securities carry a higher egress to stimulate the investors to choose them over more liquid securities. umteen investors give accept a lower interest rate on securities that are not taxed. For example, the interest rate on a local presidential term 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 durable termed securities the interest rate is higher on securities with longer terms. Taking all of the to a higher place tuition into account, the securities would be stratified from highest to lowest in this wander; X, W, Y and Z. The rating of BBB puts that security as the...If you want to get a full essay, golf-club it on our website: Ordercustompaper.com
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