Question
The Swedish government is just about to issue a new 10-year sovereign bond. According to financial experts, the investors will require a 5% return on
The Swedish government is just about to issue a new 10-year sovereign bond. According to financial experts, the investors will require a 5% return on their investment in the bond, but investors require only a 2% return on an identical Norwegian government bond. However, the Swedish Ministry of Finance suggests that Sweden should change its public debt estimation method. This reform would change nothing in the Swedish economy except the reported level of public debt. According to the Swedish Ministry of Finance, the investors would require a lower return on the 10-year Swedish bond, if the new public debt, estimated with the new method, is lower. Do you agree with this?
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