Q1. Yield is the cost to the issuing entity for borrowing and the return to the investor/creditor for lending the money. Yield is also referred to as the market rate and the effective rate of borrowing.
Record the yield of a high-quality corporate bond that matures in 1-10 years. __________
Q2. Ratings are a measure of risk. Standard & Poor’s and Moody’s are two companies that assess the amount of risk. A rating of AAA indicates very low risk and a rating of C indicates very high risk.
a. Record the yield of a high-quality corporate bond that matures in 1-10 years. __________
b. Record the yield of a high-yield corporate bond. __________
c. Explain why one yield is higher than the other for these two types of corporate bonds.
Q3. Bonds have different lengths of time to maturity.
a. Record the yield of a high-quality corporate bond that matures in 1-10 years. __________
b. Record the yield of a high-quality corporate bond that matures in over 10 years. __________
c. Explain why one yield is higher than the other for these two types of corporate bonds.
Q4. Bonds issued by corporations are usually not tax-exempt, whereas bonds issued by municipalities usually are tax-exempt.
a. Record the yield of a high-quality corporate bond that matures in 10+ years. __________
b. Record the yield of a high-quality tax-exempt bond that matures in 7-12 years. __________
c. Explain the advantage of tax-exempt bonds to the investor/creditor.
d. Explain why one yield is higher than the other for these two types of bonds.