Listed below are data that pertain to the corporate bond market. (Note : Each "period" below...

Listed below are data that pertain to the corporate bond market.

(Note :

Each "period" below covers a span of 6 months.) (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.)

	Period 1	Period 2	Period 3	Period 4
Average yield on 10 high-grade corporate bonds	5.32 %	5.75 %	5.09 %	?
Yield on the Dow Jones average of 40 corporate bonds	6.54 %	?	6.04 %	4.92 %
Yield spread (in basis points)	?	151	?	23
Confidence index

a. Compute the confidence index for each of the 4 periods listed above.

b. Assume the latest confidence index (for period 0, in effect) amounts to

86.83 % while the yield spread between high- and average-grade corporate bonds is 85

basis points. Based on your calculations, what's happening to bond yield spreads and the confidence index over the period of time covered in the problem (i.e., from period 0 through period 4)?

c. Based on the confidence index measures you computed, what would be your overall assessment of the stock market? In which one or more of the periods (1 through 4) is the confidence index bullish? In which one(s) is it bearish?

Solutions

Expert Solution

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Go through it, Any doubts, please feel free to ask, Give positive feedback, Thank you

jeff jeffy answered 1 year ago

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