Treasury debt is lower than yield on five-year treasury debt

Assignment Help Financial Management
Reference no: EM131510766

You observe that the yield on one-year U.S. Treasury debt is lower than the yield on five-year U.S. Treasury debt. This is typically true because:

Investors expect inflation will be decreasing.

Investors require additional compensation since bonds with shorter maturities are always less liquid.

Investors demand compensation for accepting the higher interest rate risk of bonds with longer maturities.

The default risk-premium is decreasing.

The yield curve can never be downward sloping.

Reference no: EM131510766

Questions Cloud

Forecasts that inflation is going to increase : Inflation was 2% last year. Thomas forecasts that inflation is going to increase to 4% this year.
The bonds have more interest rate risk : At issue these bonds were rated BBB, but today they are rated AAA. The bonds have more interest rate risk than when they were issued.
Related to the term structure of interest rates : Which one of the following risk-premiums, by definition, is not related to the term structure of interest rates (i.e. shape of the yield curve)?
Make an accept-reject decision based on the results in part : Compute the values of i*’s for this project. Make an accept-reject decision based on the results in part
Treasury debt is lower than yield on five-year treasury debt : You observe that the yield on one-year U.S. Treasury debt is lower than the yield on five-year U.S. Treasury debt.
Zero-coupon bond to finance a new sausage factory : Three years ago Johnsonville Inc. issued a coupon bond and a zero-coupon bond to finance a new sausage factory.
Why do so many analysts disregard equity income : When it comes to restatements, why do so many analysts disregard Equity Income?
What is the break-even cost per kilowatt-hour : You require a return of 11 percent and use a light fixture 500 hours per year. What is the break-even cost per kilowatt-hour?
What will be the remaining loan balance : What is the monthly payment? How much will Joan end up paying for the house if she lives there for 25 years? what will be the remaining loan balance?

Reviews

Write a Review

 

Financial Management Questions & Answers

  The type of risk which can be diversified away is called

1 the type of risk that can be diversified away is called .a unsystematic riskb systematic riskc nondiversifiable riskd

  Conduct sensitivity analysis to determine sensitivity of NPV

Use Excel formulas to do all the calculations, that is, do not calculate anything on a calculator and just input the answer in your file. Develop a spreadsheet model, and use it to find the project’s NPV, IRR, and payback. Conduct a sensitivity analy..

  What is the current market value of the firms debt

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Corporation's balance sheet as of today is as follows: The yield to maturity is 11 percent, so the bonds ..

  Start bakery business

You want to start a bakery business. For this, you will need a capital of $ 75,000 to start operating. If you have to operate within 4 years. That sum total should now invest 12% quarterly composite, the amount needed to keep and operate your busines..

  The present value of each of your cousins debts

At the same interest rate, t years from now, your other cousin Jay borrows $1900. If the present value of each of your cousin's debts is the same, what is t?

  As long as the inflation rate is positive

As long as the inflation rate is positive, the real rate of return on a security will be ____ the nominal rate of return.

  Prepare loan amortization schedule based on monthlypayments

Based on the information provided below, compute the Net Present Value of the project.- Prepare loan amortization schedule based on monthlypayments.

  What is the company unlevered cost of equity capital

Williamson, Inc., has a debt–equity ratio of 2.6. The company's weighted average cost of capital is 9 percent, and its pretax cost of debt is 7 percent. The corporate tax rate is 40 percent. What is the company’s cost of equity capital? What is the c..

  Navigation systems inc now has total worldwide revenues of

navigation systems inc. now has total worldwide revenues of over 500 million forecast for this coming year. you have

  How much has been swept into an mmda

How much of the money you deposit is actually in the account on a typical day, and how much has been swept into an MMDA?

  Estimate the current value of stock using same assumptions

Marge Inovera is trying to value the stock of Hot Tub Time Machines, Limited (HTTM). To easily see how a change in one or more of her assumptions affects the estimated value of the stock, she is using a spreadsheet model. The model has projections fo..

  Diversification is most effective when security returns

Diversification is most effective when security returns are uncorrelated.

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