Why might deflation be good news to investors who hold bonds

Assignment Help Financial Management
Reference no: EM131305433

In the article referenced in Solved Problem, Consumer Reports also advised, "Bonds could do well in 2010 if deflation reigns."

a. What is deflation?

b. Why might deflation be good news to investors who hold bonds?

Reference no: EM131305433

Questions Cloud

Equilibrium price and equilibrium quantity of bonds : Explain what will happen to the equilibrium price and equilibrium quantity of bonds in each of the following situations.
Why interest rate on greek government bonds was increasing : Explain what the article means by "uncertainty over Greece's ability to fund itself."- What does it mean to say that Greek bonds were "under increasing pressure"?
What racial distinctions exist in regards to stature explain : Steckel (1995) uses anthropometric analysis to better understand well-being during a period of time before GDP was formally recorded. What racial distinctions exist in regards to stature? Explain
Devise a book recommendation system : DATS 6103: Introduction to Data Mining - devise a book recommendation system for the data uploaded to Blackboard. In particular, develop a system that can recommend up to three books for an arbitrary user that can be entered into R after sourcing y..
Why might deflation be good news to investors who hold bonds : In the article referenced in Solved Problem, Consumer Reports also advised, "Bonds could do well in 2010 if deflation reigns."- What is deflation?- Why might deflation be good news to investors who hold bonds?
Why would longer term bonds be most at risk : Longer-term bonds are most at risk." What effect would an increase in expected inflation have on bond prices? Why would longer-term bonds be most at risk?
Discuss about the hiv-aids-malaria-anemia : Discuss about the causes of maternal mortality include severe bleeding, obstructed labor, infection, hypertensive disorders of pregnancy, HIV/AIDS, malaria, anemia, and unsafe abortion.
What will be the effect on bond prices and interest rates : What will be the effect on bond prices and interest rates?- Who is likely to have gained the most: investors who bought long-term bonds in 2010 or investors who sold them? Briefly explain.
Calculate the break-even point : Choose any industry and an organization (exception of Starbucks and Mcdnalds) within industry with which you are familiar. Using this organization as your example calculate the break-even point both in $ and unit terms, graphically and using equat..

Reviews

Write a Review

Financial Management Questions & Answers

  Cost of borrowing the maximum amount of credit

Bonneau Sunglass Co. is considering the factoring of its receivables. The firm has credit sales of $500,000 per month and has an average receivables balance of $1,000,000 with 60-day credit terms. What is the cost of borrowing the maximum amount of c..

  What are the primary sources of noninterest income

What are the primary sources of noninterest income for both a small community bank and a large bank with many subsidiaries and global operations?

  What was your real return

Say you own an asset that had a total return last year of 11.3 percent. If the inflation rate last year was 6.1 percent, what was your real return?

  Division is considering two investment projects

Your division is considering two investment projects, each of which requires an up-front expenditure of $24 million. You estimate that the cost of capital is 8% and that the investments will produce the following after-tax cash flows (in millions of ..

  Economic life using the straight-line method

Howell Petroleum is considering a new project that complements its existing business. The machine required for the project costs $3.87 million. The marketing department predicts that sales related to the project will be $2.57 million per year for the..

  What is this projects equivalent annual cost

A five-year project has an initial fixed asset investment of $275,000, an initial NWC investment of $23,000, and an annual OCF of −$22,000. The fixed asset is fully depreciated over the life of the project and has no salvage value. If the required re..

  Calculate the variance of the market return

Calculate the expected market return, The variance of the market return,  The expected return for the Donovan Company. - The covariance of the return for the Donovan Company with the market return.

  Firms weighted average cost of capital

Klausenheimer has earnings before interest and taxes of $1,500,000. The book and the market value of debt is $1.7million. The unlevered cost of equity is 15.5 percent while the pre-tax cost of debt is 8.6 percent. The tax rate is 38 percent. What is ..

  What will the eps of potter be after the merger

The shareholders of Harry Company have voted in favor of a buyout offer from Potter Corporation. Harry has a P/E ratio of 6.35, 71,000 shares outstanding, and earnings of $239,000. Potter has a P/E ratio of 12.70, 132,000 shares outstanding, and earn..

  What was his percentage return on investment

Dave bought a rental property for $725,000 cash. One year later, he sold it for $750,000. Suppose Dave invested only $105,000 of his own money and borrowed $620,000 interest-free from his rich father. What was his percentage return on investment?

  Calculate liabilities-to-assets ratio

Assume you are given the following relationships for the Haslam Corporation: Sales/total assets 2 Return on assets (ROA) 3% Return on equity (ROE) 5%. Calculate Haslam's profit margin. Calculate Haslam's liabilities-to-assets ratio.

  Calculate aftertax cash flows for first year for each bond

Suppose your company needs to raise $52 million and you want to issue 25-year bonds for this purpose. Assume the required return on your bond issue will be 7 percent, and you’re evaluating two issue alternatives: A semiannual coupon bond with a coupo..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd