C1. A. Should the yield of a corporate bond be higher or lower than a Treasury which has the same maturity date but a lower coupon? Why? [2 points]

C1. B. Suppose the yield of the Treasury is 2%, the likelihood of default in the next year of the corporate is 1.5%, and the expected recovery rate conditional on default is 40%. Ignoring liquidity issues, what is your best estimate of the yield of a bond issued by this corporate? [4 points]

C2. A Treasury bond has a coupon rate of 9%, a face value of 100$ and matures 10 years from now. For a treasury bond, the interest on the bond is a paid in semiannual installments. The current riskless interest rate is 12%.

a) What is the current price of the bond? [3 points]

b) If you buy the bond at this price, under what circumstances do you make money? [2 points]

c) Let's suppose you buy the Treasury Bond described above. Just after you buy, the risk interest rate decreases to 9%. What would be the new market price? [2 points]

Homework: HW4: Chapter 3 m Score: 0 of 1 pt 10 of 25 (15 complete) HW Score: 29.33% itil y 3.3.13 I Quest Graph the given function. Give the intercepts and state the range. y = f(x)= x -6x +8 Use the graphing tool to graph the function. orke Click to enlarge graph stio stion stion ition tion ition tion Click the graph, choose a tool in the palette and follow the instructions to create your graph. partsNB Construction is bidding on a project whose costs are divided into $30,000 for start-up and $260,000 for the first year evenly distributed over 12 months. If interest rate is 1% per month, what is the present worth of the costs?2 x 2 matrices over R, considered as a group with respect to multi- plication. In (a)-(e) below, determine whether the given subset is a subgroup of GL(2, IR). (a) The subset consisting of matrices with determinant 1. (b) The subset consisting of matrices of the form (ba ) for a re number a. (c) The subset consisting of (non-singular) triangular matrices. (d) The subset consisting of those (non-singular) matrices where matrix entries are integers. (e) The subset consisting of those (non-singular ) matrices whe6. All economies have goods markets, factor (e.g. labour) markets and money markets. Prices serve to co-ordinate the potentially millions of consumers and thousands of firms such that, in the words of Thomas Nechyba, "spontaneous order" in the economy is achieved. Discuss the role that markets and prices play in answering the 'three fundamental questions of economics': What to produce? How to produce it? and For Whom it is produced? Also, how does the First Welfare Theorem relate to how markets and prices function? (7 marks)