Why would the spread increase as a result of moody’s action

Assignment Help Finance Basics
Reference no: EM131304540

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: EM131304540

Questions Cloud

What is a sovereign debt crisis : What are the two methods that governments typically use to avoid bank panics?- What is a currency crisis? What is a sovereign debt crisis?
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? Draw a demand and supply graph for bonds to illustrate your answer.
What obstacles was robert banes facing in receiving care : What obstacles was Robert Banes facing in receiving care for his health problems? What help was available for him?
Why the financial crisis have been difficult to foresee : Why might the financial crisis have been difficult to foresee, even by people working in high-level positions in the financial system?
Why would the spread increase as a result of moody’s action : What is "the spread between Greece and Germany"? Why would the spread increase as a result of Moody's action?
Difference between retail and institutional cash flow : Compare the difference between retail and institutional cash flow to money market funds. How do they differ? Why do you think they differ?
What are their pre-tax yields : If the state and federal perpetuities both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 39.6%.)
Does a bank have to be insolvent to experience a run : What is a financial crisis?- What is a bank run? Does a bank have to be insolvent to experience a run?- What is contagion? What is the connection between contagion and a bank panic?
How do organizations create opportunitiy for illegal conduct : How do organizations create opportunities for illegal conduct?Identify the external factors that impact corporate crime. Describe Karl Marx's theory of crime as it relates to white collar crime. Discuss the limitations of the Marxist theory.

Reviews

Write a Review

Finance Basics Questions & Answers

  Capital structure is financailly improtant

Of course, although capital structure is financailly improtant, it, like many business decisions, is generally not so important as the firm's product and services.  Do you agree with thestatement?  Why yes, why not?  Explain and respond to two other ..

  Show that speed of the wave front decreases as r increases

A large amount of energy E is suddenly released in the air as in a point of explosion. Experimental evidence suggests the radiusr of the high-pressure blast wave depends on time t as well as the energy E and ρ the density of the ambient air.

  Calculate the stock value

Last year Productions pays no dividend at the present time. The company plans to start paying an annual dividend in the amount of $0.40 a share for two years commencing four years from today.

  Should tangshan mining company accept a new project

Should Tangshan Mining company accept a new project if its maximum payback is 3.25 years and its initial after tax cost is $5,000,000 and it is expected to provide after-tax operating cash inflows of $1,800,000 in year 1, $1,900,000 in year 2, $70..

  Will short term creditors agree to invest in this company

With this company's financial statement, what has changed over the years. Is it negative or positive? Will investors invest in this company? Will short term creditors agree to invest in this company with its financial statement?

  How much of the gain is ordinary income

Jess sold a piece of equipment she used in her business. The equipment cost Jess $51,500 several years ago and had accumulated depreciation taken in the amount of $20,300. Jess sold the equipment for $35,000.

  Explain a mortgage company

Explain how a mortgage company's degree of exposure to interest rate risk differs from that of other financial institutions.

  What is the weighted average contribution margin

Lambardi sells in a mix of 2 units of A, 3 units of B and 5 units of C. What is the weighted average contribution margin per unit for Lambardi?

  Sufficient funds to finance any decision she makes

Project B costs $115,000, and has a cash flow of $50,000 a year for Years 1 to 3. She has sufficient funds to finance any decision she makes. Which project or projects, if either, should she accept and why?

  Write about the short term and long term financing needs

Make recommendations on potential discretionary financing needs.? Write a 350 - 700 word analysis of the company's short term and long term financing needs and determine strategies for the company to manage working capital.

  Should ellen take the cash or the note

The riskless rate is 3.4%. Find the value of the cash offer, and the value of the note. Should Ellen take the cash or the note?

  Males and females have equal levels of education

Using statistics software determine whether or not males and females have equal levels of education. The required variable is EDUC with the frequencies procedure with the frequencies procedure to produce frequency tables and the mean median, and ..

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