Assuming the government is selling a government bond to fight COVID-19, and at the same time, ASHANTI Goldfields Company is selling a corporate bond to increase its production. Under what conditions will the production-linked corporate bond be over-subscribed at the expense of the government bond. Explore all possible scenarios.
What will be an ideal response?
Answer: Since the corporate bond is over- subscribed at the expense of the government bond it can be due to many factors.
1. If suppose this company has found the cure for COVID and need money to scale production of vaccines, then investors will definitely prefer it over the government bond.
2. It can also be that the company wants to expand production of items related to corona virus like sanitizers, gloves, masks and PPE etc.
3. In this time of crisis, the government bond yield has gone down because of investors' flight to safety. Hence, it might be that the risk-profile of the company and the corresponding returns associated with those risks are such that it offers a bargain as compared to the government bond.
4. It can also be that they would have come up with a new offering which changes the traditional modes of businesses. For e.g. people are afraid to buy things from outside and they are also afraid of ordering things online. Hence, if they come up with suppose a drone or any other product which allows e-commerce sites to deliver their products and other essentials like food etc in a way that minimzes human contact and reduces fear in the minds of people, then investors would prefer it because the demand for such a product would be very good in these times.
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In a capitalistic economic system, who owns most of the nation's resources?
A. Labor unions B. The government C. Private individuals D. No one
If the Federal Reserve increases the money supply, then initially people want to
a. sell bonds so the interest rate rises. b. sell bonds so the interest rate falls. c. buy bonds so the interest rate rises. d. buy bonds so the interest rate falls.
Refer to the information provided in Figure 34.2 below to answer the question(s) that follow.
Figure 34.2Refer to Figure 34.2. The dollar is currently at Point A. An decrease in income in the U.S. causes a movement to Point
A. E. B. B. C. C. D. D.
The value of the discount weight used to translate utils into current utils is:
A) one. B) less than one. C) greater than one but less than two. D) greater than one but less than three.