Archive for the ‘Corporate Bonds 101’ Category
Corporate Bonds And Risk
April 6th, 2006
Question: The differences in rates among these issues were caused primarily by _________.?
Assume that interest rates on 20-year Treasury and Corporate Bonds are as follows:
T-bond = 7.72%
AAA = 8.72%
A = 9.64%
BBB = 10.18%
The differences in rates among these issues were caused primarily by _________.
a. tax effects
b. default risk differences.
c. maturity risk differences.
d. inflation differences.
e. real risk-free rate differences.
Answer: b. Default risk differences.
Municipal Bonds Vs. Corporate Bonds
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Tags: bonds, business, corporate bonds and risk, economics, finance, research | 
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Corporate Bonds And Gilts
March 8th, 2006
Question: What is the difference between the Open Market and the Capital Markets?
I understand a Central Bank can buy/sell government bonds (i.e. Gilts) in the open market in order to control the money supply and its reserves.
I also read recently that in the UK, the Bank of England will be implementing a quantitative easing policy whereby it will be buy Gilts and Corporate Bonds in the Capital Markets.
I am slightly confused as to whether the Open Market and Capital Markets are almost one and the same thing? Is this the case, or are they distinctly different?
Answer: "Capital market" just refers to any of the public exchanges where capital securities (ie, stocks and bonds) are traded. SO that's just a generic term.
"Open Market" usually refers to Federal Reserve operations in which they participate in the market of banks lending money to one another overnight. Therefore it is not actually "open" from our point of view -- it's restricted to banks trading with each other out of the public eye. Nevertheless that is called the Fed's "open market activities". However someone might use the term "open market" as a synonym for "public markets" or "capital markets" if they are being imprecise -- maybe you;ve seen that.
www.fixedincomeinvestor.co.uk
Posted in Corporate Bonds 101 |
Tags: finance, gilt,money, gilts, history, investing |
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