The statement, investor perception on the risk of bonds will raise their desired return is true.
The higher an investment's risk, the greater its potential returns should be. By contrast, a very safe and low-risk investment should generally offer low returns. So, this investor perception will raise the desired return of the risk of bonds.
Generally, the higher the potential return of an investment, the higher the risk. Thus, there is no guarantee that you will actually get a higher return by accepting more risk. In this matter diversification is useful.
Hence, you can minimize the risk by making sure the company's bond you own is not a high risk company with a high probability of paying back.
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Answer:
Bondholders have a degree of legal protection against default risk, but it is not comprehensive.
Explanation:
A bond can be defined as a debt or fixed investment security, in which a bondholder (investor or creditor) loans an amount of money to the bond issuer (government or corporations) for a specific period of time. The bond issuer are expected to return the principal (face value) at maturity with an agreed upon interest (coupon), which are paid at fixed intervals.
The par value of a bond is its face value and it comprises of its total dollar amount as well as its maturity value. Also, the par value of a bond gives the basis on which periodic interest is paid. Thus, a bond is issued at par value when the market rate of interest is the same as the contract rate of interest. This simply means that, a bond would be issued at par (face) value when the bond's stated rated is significantly equal to the effective or market interest rate on the specific date it was issued.
In Economics, bonds could either be issued at discount or premium. A bond that is being issued at a discount has its stated rate lower than the market interest rate, on the specific date of issuance while a bond that is issued at a premium, has its stated rate higher than the market interest rate on the specific date of issuance.
Default risk in bonds refer to the risk that a bond issuer (borrower) is unable to pay the principal or interest agreed upon in the contract with the bondholder (lender) in a timely manner.
Hence, the true statement about default risk is that bondholders have a degree of legal protection against default risk, but it is not comprehensive.
Usually it isn't done much, because of the penalty of bad grades, and because frankly, the professors have seen it before, and therefore, only the boldest would consider it.
Answer:
It breaks down on two parts to be fully explained.
Explanation:
Part 1
The correct answer is:
The D option (All of the above are correct) which applies perfectly in the firms of competitive markets.
Part 2
Referred to Table 2.
For this firm, the average revenue from selling 3 units is A) $12. B) $4. C) $3. D) $1.
Table 2
The reference to table 2 represents a demand curve faced by a firm in a competitive market.
Price Quantity
$4 0
$4 1
$4 2
$4 3
$4 4
$4 5
The correct answer is:
The B option ($ 4) which it would represent the overall average revenue from selling 3 units.
The net present value of this lockbox arrangement is $1,205,378.06.
Since you are considering implementing a lockbox system for your firm, and on an average day, your firm receives 1,370 checks with an average value of $ 880 each, and the daily interest rate on Treasury bills is 0.01 percent, and the bank charge per check would be $ 0.25, to determine what is the net present value of this lockbox arrangement, the following calculation must be performed:
- ((1370 x 880) x 1.0001) - (1370 x 0.25) = X
- 1,205,720.56 - 342.5 = X
- 1,205,378.06 = X
Therefore, the net present value of this lockbox arrangement is $1,205,378.06.
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