What is greek debt and what is junk status

Assignment Help Finance Basics

Reference no: EM131305366

As mentioned in the chapter, during early 2010, investors began to worry that the government of Greece might default on its bonds. The rating agencies downgraded Greek bonds several times.

Following one of the rating downgrades, an article in the Wall Street Journal noted that: The spreads-or premiums demanded by investors to lend-to Greece versus supersafe Germany blew out again Tuesday, following Moody's downgrade of Greek debt to junk status Monday.

The spread between Greece and Germany was 671 basis points- or 6.71 percentage points, up by a little less than 80 basis points on the day.

a. What does it mean that Moody's downgraded "Greek debt to junk status"? What is Greek debt? What is junk status?

b. What is "the spread between Greece and Germany"? Why would the spread increase as a result of Moody's action?

Reference no: EM131305366

Questions Cloud

Reduce the aaa rating on us treasury bonds : Why would credit rating agencies indicate that they might reduce the AAA rating on U.S. Treasury bonds if the federal government runs high deficits over a period of years?

Construct a chart from data presented in a table : Compare your percentage of occurrence of colors to that shown as the M&M standard. Create a chart showing the comparison.

What would we observe in the market for treasury bonds : If investors began to believe that the probability that the Treasury might default on its bonds had increased, what would we observe in the market for Treasury bonds?

Identify whether you would create a separate document : identify whether you would create a separate document (with a cover note) or include the report within the body of a letter, memo, or email.

What is greek debt and what is junk status : What does it mean that Moody's downgraded "Greek debt to junk status"? What is Greek debt? What is junk status?

Which bond would you prefer to own : If you are an investor with a 33% tax rate on interest income but a 0% tax rate on capital gains, which bond would you prefer to own? Briefly explain.

Find the energy stored in the inductor : A 1000-pF capacitor, a 1-mH inductor, and a current source of 2 cos 106t mA are in series. The capacitor voltage is zero at t = 0. Find the energy stored (a) in the inductor at t = 0; (b) in the capacitor at t = 1.571 μs; (c) in both inductor and ..

Is the biggest risk of holding long term treasury bonds : Is the biggest risk of holding long-term Treasury bonds at low interest rates the risk that the Treasury will default?

Evaluate your classmates’ online surveys : When you're satisfi ed that your questions meet the criteria for well-designed questionnaires, create a free online survey on a site such as www.surveymonkey.com or www.zoomerang.com. Distribute the survey to your classmates. (See the next exercis..

User Account

All Pages