Question

In: Finance

2. Consider the United States Treasury bonds, what are the ratings? Historically, has there ever been...

2. Consider the United States Treasury bonds, what are the ratings? Historically, has there ever been a change in quality ratings for the U.S. government? (Hint: You can review the past 15-20 years). Why or why not?

3. Consider a company that has an investment grade rating, are they guaranteed to be protected from Bankruptcy?

Solutions

Expert Solution

2. United States treasury bonds are considered to be risk free in nature and these treasury bonds are having the lowest possible risk as they are AAA rated which is a representation of the the lowest possible degree of risk and they also have the backing of the Federal government.

There has been a change in the rating at the time of 2008 financial crisis when there was a risk related to financial insolvency of various companies and it was reflected into United States treasury Bond which was downgraded by many rating agencies but it was still in the investment category but the risk associated with investment in these bonds have also been higher due to risk of a financial collapse.

2. No ,whent investment grade rating has been issued to a company it will not mean that it is going to protect it from the bankruptcy because investment grading is just protection from risk associated with the market changes but not it is guaranteeing any kind of protection from bankruptcy because it is just a rating which has been issued by the credit rating agencies and it is no assurance for guarantee to act.


Related Solutions

16. In the United States, there has historically been a strong relationship between smoking and education,...
16. In the United States, there has historically been a strong relationship between smoking and education, with well-educated people less likely to smoke. To examine whether this pattern has changed, a sample of 187 high school graduates, a sample of 139 College graduates, and a third sample of 133 graduate school graduates were selected at random from those who had visited a health center for a routine check-up over the course of the past year. Smoking Status Education Nonsmoker Former...
The Great Depression was the greatest economic disaster that the United States has ever faced. A...
The Great Depression was the greatest economic disaster that the United States has ever faced. A number of factors have been suggested as the cause of the Depression. Discuss at least three of the factors that you feel were the most important reasons for either causing the economic turmoil or responsible for exacerbating it.
Consider the role of the United States Treasury Department, the Internal Revenue Service, in International Taxation....
Consider the role of the United States Treasury Department, the Internal Revenue Service, in International Taxation. What do you think are the major obstacles facing the Internal Revenue Service as our markets continue to become more international? As you continue to evolve in our international markets, how might the Internal Revenue Service’s role change?
Why has there been a proliferation of interest groups in the United States? What have been...
Why has there been a proliferation of interest groups in the United States? What have been the effects on the political process? What are some of the historical reasons for the proliferation of interest groups during the 1930s and the 1960s?
Historically the United States has always enjoyed being the world's largest producer of goods and services....
Historically the United States has always enjoyed being the world's largest producer of goods and services. However, it appears that all of that will change shortly. According to The Independent, in an article dated February 1, 2007, by the 2030s China's GDP will become larger than the United States' GDP based on their current growth rate and by the 2040s India's GDP will also become larger than the United States' GDP as well. This means that the United States will...
What ratings comprise investment-grade bonds and what ratings are used for junk bonds? What are the...
What ratings comprise investment-grade bonds and what ratings are used for junk bonds? What are the primary differences between the two? In particular, why are investment-grade bonds more marketable and why are junk bonds issued at all? Describe how lower rated bonds may be transformed into securities that investors who are limited to investment grade bonds may be able to purchase.
The money supply for the United States is approximately $15 trillion. What value of U.S. Treasury...
The money supply for the United States is approximately $15 trillion. What value of U.S. Treasury debt should the Fed buy or sell in order to reduce the money supply by 5% if the reserve ratio is 10%? Report an open market purchase as a positive number, an open market sale as a negative number, and round to the nearest whole billion dollars.
The United States has been called a "Melting Pot". Define the Melting Pot. Is the United...
The United States has been called a "Melting Pot". Define the Melting Pot. Is the United States really a "Melting Pot" of Nations? Or is it something else?
2. Consider the impact on the market for U.S. Treasury bonds when there are unusually high...
2. Consider the impact on the market for U.S. Treasury bonds when there are unusually high returns in the U.S. stock market. What changes in the market for U.S. Treasury bonds? What happens to the equilibrium, price, quantity, and interest rate on U.S. Treasury bonds? **Select ALL that apply. ** ___ Demand for U.S. Treasury bonds rises ___ Demand for U.S. Treasury bonds falls ___ Demand for U.S. Treasury bonds does not change ___ quantity increases ___ quantity decreases ___...
A United States Treasury bond pays annual interest, has a par value of $1,000, matures in...
A United States Treasury bond pays annual interest, has a par value of $1,000, matures in 24 years, has a coupon rate of 1.14% per annum, and has a yield to maturity (YTM) of 11.33% per annum.  The default risk premium on the bond issued by a United States company called Risky Business in the United States is 2.89% per annum. The bond issued by Risky Business pays annual coupon, has a par value of $1,000, matures in 24 years and...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT