Banking And Finance Assignment Package 2 (Weight In Total Marks 20% ) Each Of The Following Question Carries 2 Marks

271 words - 2 pages

Q1. What is risk premium? How is it measured? When there is an increase in the default risk on corporate bonds (due to bad economic conditions), what will happen to risk premium. Will it shrink or widen? Why?
(See pages 120-22 3rd edition) (see page 114-115 4th edition)

Default risk occurs when the issuer of a bond is unable or unwilling to make interest payments when promised or pay off ...view middle of the document...

Canadian Government bonds are considered to have no default risk, as its backed by the taxation power. These bonds are called default free bonds. The spread between the interest rates on bonds with default risk and default free bonds is called Risk Premium and it indicates how much additional interest people must earn in order to hold the risky bond. With an increase in default risk on corporate bonds, risk premium is raised and so will widen. If the default risk increases, the expected return decreases. The theory of Asset demand predicts that because the expected return on corporate bond falls relative to the expected return on the default-free Canada bond, while its relative riskiness rises, the corporate bond is less desirable and demand for it will fall. This leads to the equilibrium price to fall and shift left and since bond price is negatively correlated to interest rates, equilibrium interest rate rises. So a bond with default risk will always have a positive risk premium and an increase in default risk will raise the risk premium.

Other Papers Like Banking And Finance Assignment Package 2 (Weight In Total Marks-20% ) Each Of The Following Question Carries 2 Marks

Topic 1: Discussion Question 2 Essay

313 words - 2 pages Topic 1: Discussion Question 2 I reminisce to the excitement of the first day of school as I begin the next chapter of my educational journey. The sweet feeling of unknown, the butterflies in the stomach bring about childhood memories. I am looking forward to expanding my knowledge, the joy of overcoming the challenges and most importantly, earning my BSN. I have my goals set clearly before me and my motivation is strong. I know I can overcome

Admn 233 Assignment 2

3722 words - 15 pages ADMN 233 Assignment 2 Template Assignment 2 Instructions Assignment 2 is worth 15% of your final mark. It should be completed and submitted after you finish Chapter 7 in your textbook. This assignment is divided into three parts, corresponding to the 3-x-3 writing process described in Unit 2 (Chapters 5 to 7) of your textbook. You will complete three activities in each part of this assignment. Part 1

Assignment 2: Ethics And Corporate Responsibility In The Workplace And The World

1118 words - 5 pages the low standard of living in Colberia, much of the population lives in primitive huts with no electricity or running water. PharmaCARE’s executives, however, live in a luxury compound, complete with a swimming pool, tennis courts, and a golf course. PharmaCARE’s extensive activities in Colberia have destroyed habitat and endangered native species. Two (2) years ago, after PharmaCARE’s research indicated that one of its top-selling diabetes

Econ 405 Assignment 2

625 words - 3 pages Assignment 2: Externalities of Education Normarie Castellon Professor George A. Uhimchuk ECO405 – Economic Problems & Issues Summer Term 2012 In economics, an externality is a cost or benefit that is not transmitted through prices and is incurred by a party who was not involved either as a buyer or seller of the good or service causing the cost or benefit. The positive externalities of education include, but are not limited to, a

Homework Assignment 2

307 words - 2 pages Short Answers 1. The first thing a professional programmer will usually do to gain the understanding of a problem is to work directly with, and interview the customer. 2. An informal language that has no syntax rules, and is not meant to be compiled or
executed 3. Computer programs usually follow the following three steps:
1) Input is received.
2) Some process is performed on the input.
3) Output is produced. 4. Commonly

Module 2 Assignment

910 words - 4 pages Running head: MODULE 2 HOMEWORK Module 2 Homework Author Note This paper was prepared for Introduction to Film History, Module 2 Homework taught by Directions: Using word processing software to save and submit your work, please answer the following short answer questions. All responses to questions should be one to two paragraphs, composed of five to seven sentences, in length. Your responses should

Ge347 Assignment 2

985 words - 4 pages task at hand, the team works through their strategies, relying on one another for knowledge, skills, and their individual abilities. As the movie starts, Ocean is released from prison in New Jersey, and has already planned the heist. Ocean quickly pieces together his team of criminals, from card magicians, to hackers, to pocket pickers, each and every teammate has their place on the team. Once the team is assembled, they all have their own

Netw420 Week 2 Assignment

861 words - 4 pages track of any and all issues relating to the network (OTRS Team, 2012). A very useful feature of trouble ticket systems is that they save and archive the tickets with all pertinent information like who was involved, the problem and any notes or solutions (OTRS Team, 2012). In case a particular event occurs again the help desk team has a reference to look to for assistance. With any kind of machine or system, maintenance must take place in order

Assignment 2: Compensation Plan Outline

301 words - 2 pages Assignment 2: Compensation Plan Outline Using the same company you researched in Assignment 1, evaluate the company’s compensation plan to determine how it could be improved. Write a six to eight (6-8) page paper in which you: * Evaluate the existing compensation plan to determine if it is the most appropriate for your company. Explain your rationale. * * Determine the most beneficial ratio of internally consistent and

Eco/372 Week 2 Assignment

1339 words - 6 pages exports less imports that occur within a defined territory. * Real GDP - An inflation-adjusted measure that reflects the value of all goods and services produced in a given year, expressed in base-year prices. * Nominal GDP- A gross domestic product (GDP) figure that has not been adjusted for inflation. * Unemployment Rate - The percentage of the total labor force that is unemployed but actively seeking employment and willing to

Business Unit 2 Assignment 1

4430 words - 18 pages . Task 2 Describe the main employability, personal and communicational skills required when applying for a specific job role as described in task 1. Specific Job: Science teacher Requirements A science teacher would need a list of skills to get a job at an institution such as Beechwood and also there are loads of requirements. The first thing that a science teacher would need, is a science qualification which enables them to teach a certain

Related Essays

Using Material From Item A And Elsewhere, Assess The View That The Main Function Of The Education System Is To Reproduce And Legitimise Social Inequalities. (20 Marks)

541 words - 3 pages Using material from Item A and elsewhere, assess the view that the main function of the education system is to reproduce and legitimise social inequalities. (20 marks) The education system is one of the most influential institutions in our society, as it 'breeds' children knowledge and skills from a very young age (4-5) all the way to young adulthood (16-18), through set lessons or through the hidden curriculum. Education is said to supply a

Assignment #2

1225 words - 5 pages this. We refuse one who boasts, for someday his pride will make him kill somebody. So we always speak of his meat as worthless. This way we cool his heart and make him gentle.” (4). The /ai/ai village is very similar to the Gemeinschaft, which is a small community in which people have similar backgrounds and life experiences. In the Gemeinschaft, everyone knows each other, there is a sense of togetherness and commitment to a larger social group

Module 3 Question 2 Essay

618 words - 3 pages only the topic that originally prompted the research, but it should also state the reasons that lead to formulating new questions about the identified dilemma (Polit & Beck, 2010, p. 151). The researcher’s interest is also reflected in the issue under inquiry within the context of qualitative research. There has to be a rational need for investigation, a valid reason behind the questioning, and a degree of reliability for the source of

Managerial Finance Week 2 Essay

579 words - 3 pages Managerial Finance ; FIN515 1. What is the most important difference between a corporation and all other organizational forms? A corporation is a legal entity separate from its owners. 2. What does the phrase limited liability mean in a corporate context? Owners’ liability is limited to the amount they invested in the firm. Stockholders are not responsible for any encumbrances of the firm; in particular, they cannot be required to