StudentShare solutions

# Assets and Interest Rates - Coursework Example

Free

## Extract of sample Assets and Interest Rates

The higher the credit rating, the lower will be the spread between the US treasury yield and the interest rate of the corporate bond. Here we will assume that the credit rating of the company is AAA. So for a one year bond the rate will be US treasury yield plus 14 basis points. The interest rate will be 4.74 plus 0.14 i.e. 4.88%. Similar will be the calculation for an asset which is 5 year in length. The interest rate will be 5.03% (4.63 plus 40 basis points). For calculating the yield of an asset which is 15 year in length, we will use the rate of the closest matching maturity. 2. Discuss how the interest rate will be impacted if the bond is a government bond or a corporate bond.  A government bond is issued and backed by the government while a corporate bond is issued by businesses to raise money for business expenses such as expansions. Government bonds are risk free bonds because the government can raise taxes or print currency to service the debt. Hence, government bonds do not have credit risk, default risk or counterparty risk. On the other hand, corporate bonds have a higher risk associated with default. The level of risk depends on the corporation itself, the business it is in, the market conditions in which it operates and also its credit rating. Since, investors buying corporate bonds will have to take more risk, they demand a higher return for corporate bonds to compensate the higher risk. So, the interest rate for a corporate bond will be higher than that of a government bond.

### Check these samples - they also fit your topic

Expectation Interest

The author states that the purpose of expectation damages is to put the non-breaching party in the position it would have occupied had the contract been fulfilled. Expectation damages can be contrasted to reliance damages and restitution damages, which are remedies that address other types of interests of parties involved in enforceable promises.

4 pages (1000 words) Coursework
International Financial Markets: Exchange Rates and Inflation
As the paper discusses information is extremely crucial because it enable foreign investors to make solid decisions without buying information about the stocks and financial markets. Many companies have unified their accounting standards and financial data for the potential investors to access such information.
8 pages (1750 words) Coursework
Effectiveness of the Interest Rate Adjustment
The main focus in the essay is on the effectiveness of the interest rate, as an instrument of monetary policy, conducted by the government. It is shown in the paper, that the decline or increase in interest not only affect the consumption levels and investment, interest rates also affect the inflation levels in an economy.
6 pages (1500 words) Coursework
Interest Rates
Such a fixed rate of return was received by the creditor after a year. At the time of introduction of coins, money in the early stages of history was loaned at a fixed rate of interest. We, however, discover one distinctive feature that the interest was abhorred in early stages to present day, and was considered as curse for the growth of economic activities in the underdeveloped countries.
8 pages (2000 words) Essay
1.The purpose of this coursework is to examine current fiscal and monetary policies by the UK government and their effectiveness and impact on GDP and interest rates using graphical and regression analysis
On one hand is the IS curve, which shows different combinations of real rates of interest (r) and real out-put (Y) result into goods market equilibrium while on the other hand is the LM curve, which shows different combinations of real rates of interest and
8 pages (2000 words) Coursework
Interests Rates
These rates are per annum which are further calculated on daily basis, taking into account the daily closing balance. All the above banks offer competitive interests on the certificate of deposit. Interest on these certificates is not expressed before on applies for the certificate and fills in all the required details.
2 pages (500 words) Coursework
The five key theoretical relationships among spot exchange rates, forward exchange rates, inflation rates, interest rates that result from international arbitrage activities. Critical analysis
According to Clark (2002), when there are no market flaws, risk-adjusted projected returns on financial assets in various markets should be equal. Arbitrage takes advantage
9 pages (2250 words) Coursework
The Structure of Interest Rates and Real Interest Rates
So, the loan made by the issuer of credit card is accompanied with greater risk as compared to the secured loan. This hence tends to heighten the interest rates level to a greater extent. The other basic reason is that; those interest ratings are often
2 pages (500 words) Coursework
Exchange Rates
This practice makes specified quantity of current markets and currency options in improving profitability. Satkunas (2007), views that maximizing shareholder
1 pages (250 words) Coursework
Self Interest
Humans commonly do things for their own benefit because of egoistic motives. Ethical egoism holds that it is good for people to pursue their own self-interest. However, ethics overrides self-interest, one of the traditional elements in ethical decision-making is an impartial consideration of the interest of others.
2 pages (500 words) Coursework
3. What typically happens to the interest rate as the amount of time increases, i.e. the maturity increases? Explain your answer. The interest rate of a bond increases as the maturity of the bond increases. The reason for this is very logical. Maturity date is the date at which the issuer has to repay the face value to the buyer of the bond. A higher maturity means that the lender/investor will have to take a higher risk by investing the money for a longer period. So the investor will want a higher compensation for assuming the higher risk associated with higher maturity bonds. Therefore, the investor will demand a higher interest rate for a bond that has a larger maturity. 4. Why are the interest rates different for different credit ratings? Explain your answer. Credit rating is “an assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities”. A higher credit rating would mean that the corporation has a good history of borrowing and repayment. A good history means that the corporation has met its liabilities as and when required is the past and also that the corporation is in a better position of borrowing funds. A lower credit rating means that the corporation does not have a good history of borrowing and repayment. So, for an investor the higher credit rating means that there is more likelihood that the corporat
Cite this document
• APA
• MLA
• CHICAGO
(“Assets and Interest Rates Coursework Example | Topics and Well Written Essays - 750 words”, n.d.)
(Assets and Interest Rates Coursework Example | Topics and Well Written Essays - 750 Words)
https://studentshare.net/finance-accounting/56159-assets-and-interest-rates.
“Assets and Interest Rates Coursework Example | Topics and Well Written Essays - 750 Words”, n.d. https://studentshare.net/finance-accounting/56159-assets-and-interest-rates.

## Summary

Rating 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 30 yr Aaa/AAA 4.88 4.87 4.95 5.03 5.16 5.27 5.46 Aa1/AA+ 4.96 5.01 4.99 5.11 5.24 5.36 5.55 Aa2/AA 4.98 5.08 5.07 5.17 5.27 5.39 5.59 Aa3/AA- 4.99 5.1 5.08 5.21 5.31 5.4 5.65 A1/A+ 5.17 5.19 5.2 5.28 5.39 5.52 5.73 A2/A 5.2 5.22 5.22 5.3 5.41 5.54 5.77 A3/A- 5.24 5.25 5.25 5.35 5.44 5.57 5.8 Baa1/BBB+ 5.36 5.43 5.48 5.55 5.81 6 6.26 Baa2/BBB 5.39 5.51 5.56 5.6 5.88 6.1 6.33 Baa3/BBB- 5.46 5.56 5.58 5.65 5.94 6.18 6.39 Ba1/BB+ 6.59 6.66 6.73 6.78 6.95 7.14 7.31 Ba2/BB 6.69 6.76 6.83 6.88 7.05 7.24 7.41 Ba3/BB- 6.79 6.86 6.93 6.98 7.15 7.34 7.51 B1/B+ 7.39 7.46 7.53 7.78 8.15 8.54 9.01 B2/B 7.49 7.56 7.63 7.88 8.25 8.64 9.11 B3/B- 7.59 7.66 7.73 7.98 8.35 8…
Author : tremaine86
Click to create a comment
Let us find you another Coursework on topic Assets and Interest Rates for FREE!
+16312120006