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These are the answers I have chosen. Am I right? Please check me and correct. 9. Determinants of bond yields Aa Aa If it were
These are the answers I have chosen. Am I right? Please check me and correct.
9. Determinants of bond yields Aa Aa If it were possible to invest in a completely riskless security, investors would earn the real, risk-free rate. In reality however, most securities carry additional risks, and investors must be compensated for bearing them. In the table below, identify the various risks that bond investors must be compensated for bearing Interest Default Risk Inflation Rate Risk Liquidity Taxability Premium Premium Premium Premiunm Premiunm Compensates for unfavorable tax status Compensates for holding long-term securities whose prices are sensitive to interest rate changes Compensates for the fact that prices tend to rise and decrease future purchasing power Compensates for holding securities that may not be able to be quickly and easily converted to cash at or near their true value Compensates for the possibility of the issuer being unable to meet required interest and principal paymentsStep by Step Solution
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