Given the rate information in the table below, estimate the nominal rate for a AA-rated corporate bond
Assume a liquidity premium of 8 basis points.
Identify as part of your answer the inflation risk premium, the
default risk premium, the maturity premium, and the liquidity premium.
3-month T-bills 2.0%
30-year Treasury bonds 5.0%
AA-rated corp. bonds 8.0%
Inflation Rate 1.0%
k* = 2.0% - 1.0% = 1.0%
IRP = 1.0%
DRP = 8.0% - 5.0% = 3.0%
MP = 5.0% - 2.0% = 3.0%
LP = .08% (given)
K = 1.0% + 1.0% + 3.0% + 3.0% + .08% = 8.08%
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Consumer behavior refers to
A. the five stages a buyer passes through in making choices about which product and service to investigate, purchase, and consume. B. the mental and social processes related to purchasing that are innate in a person from birth. C. those purchasing behaviors that result from (1) repeated experience and (2) reasoning. D. the aspects of a consumer's decision-making processes that cannot be measured. E. the actions a person takes in purchasing and using products and services, including the mental and social processes that come before and after these actions.
Transfer pricing refers to when a company is taken advantage of by another company it does business with after it has made an investment in expensive specialized assets to better meet the needs of the other company.
Answer the following statement true (T) or false (F)
Devaluation increases the cost of foreign goods, while it decreases the cost of domestic goods to foreign firms.
Answer the following statement true (T) or false (F)
The current U.S. dollar-yen spot rate is 125¥/$. If the 90-day forward exchange rate is 127 ¥/$ then the yen is selling at a per annum ________ of ________
A) premium; 1.57% B) premium; 6.30% C) discount; 1.57% D) discount; 6.30%