Question

In: Finance

Would you be more or less willing to buy AT&T long term bonds if A bear...

  1. Would you be more or less willing to buy AT&T long term bonds if
    1. A bear market is expected for stocks,
    1. Interest rates will rise
    1. The Fed announces they will spend up to $50 billion to buy corporate bonds such as AT&T’s?

Solutions

Expert Solution

A) Bear market is expected for stocks:

In such a scenario, I would like to purchase bonds of AT&T because

1) The potential risk reward ratio on that bonds could be very good

2) AT&T is a stable company with a good credit rating and the chance of its default will be very low

B) When interest rates risse

Once rates rise, income producing assets will suffer price losses. This is because bond prices and interest rates are inversely related. So as rates rise and investors are able to get higher rates in the market, the bonds you hold will fall in price to make up for the yield difference.

In that case, if i expect the yield curve to soften in the future, then I would surely buy the bonds only if they are available at a good price

C) Fed buying bonds

I would like to stay away and not buy bonds, because due to the supply and demand dynamics, the price of those bonds might rise which will have a negative impact on the yield

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Why will a short-term and long-term investor with the same beliefs be willing to pay the...
Why will a short-term and long-term investor with the same beliefs be willing to pay the same price for a stock?
Step 1: Pick stock you would like to invest in for the long-term (10 or more...
Step 1: Pick stock you would like to invest in for the long-term (10 or more years) Step 2: What is the CAGR (compound annual growth rate) for this stock over the past 10 years Step 3: Does this stock pay dividends? If so, what is the dividend history over the past 10 years Step 4: Write a paragraph about what this company does, how it makes money, including main products/services/users/etc, and why this is a good investment. Defend your...
Is there something you ever purchased that you would have been willing to pay more for...
Is there something you ever purchased that you would have been willing to pay more for than the listed price? What was it?                   a) What was the difference between the amount you were willing to pay and the actual price you paid?       b) Why was there such a discrepancy? Answer the following questions about taxes & subsidies: 1) Give an example of something you purchase that has a special tax placed on it. For example, cigarettes have a special tax...
Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2015. Stocks Long-Term Treasury Bonds...
Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2015. Stocks Long-Term Treasury Bonds T-bills 1950 to 2015 Average 12.6 % 6.6 % 4.40 % 1950 to 1959 Average 20.9 0.0 2.00 1960 to 1969 Average 8.7 1.6 4.00 1970 to 1979 Average 7.5 5.7 6.30 1980 to 1989 Average 18.2 13.5 8.90 1990 to 1999 Average 19.0 9.5 4.90 2000 to 2009 Average 0.9 8.0 2.70 2010 Annual Return 15.1 9.4 0.01 2011 Annual Return 2.1 29.9...
Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2015. Stocks Long-Term Treasury Bonds...
Annual and Average Returns for Stocks, Bonds, and T-Bills, 1950 to 2015. Stocks Long-Term Treasury Bonds T-bills 1950 to 2015 Average 12.6 % 6.6 % 4.40 % 1950 to 1959 Average 20.9 0.0 2.00 1960 to 1969 Average 8.7 1.6 4.00 1970 to 1979 Average 7.5 5.7 6.30 1980 to 1989 Average 18.2 13.5 8.90 1990 to 1999 Average 19.0 9.5 4.90 2000 to 2009 Average 0.9 8.0 2.70 2010 Annual Return 15.1 9.4 0.01 2011 Annual Return 2.1 29.9...
Would you be more willing to lend to a friend if she put all of her...
Would you be more willing to lend to a friend if she put all of her life savings into her business than you would if she had not done so? Why? Discuss in details.
During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds,...
During the past year, you had a portfolio that contained U.S. government T-bills, long-term government bonds, and common stocks. The rates of return on each of them were as follows: U.S. government T-bills 4.90 % U.S. government long-term bonds 6.70 U.S. common stocks 8.50 During the year, the consumer price index, which measures the rate of inflation, went from 100 to 115 (1982 – 1984 = 100). Compute the rate of inflation during this year. Round your answer to one...
Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain...
Suppose the returns on long-term corporate bonds and T-bills are normally distributed. Assume for a certain time period, long-term corporate bonds had an average return of 5% and a standard deviation of 8.3%. For the same period, T-bills had an average return of 3.5% and a standard deviation of 2.5%. Use the NORMDIST function in Excel® to answer the following questions: a. What is the probability that in any given year, the return on long-term corporate bonds will be greater...
How would you distinguish general long-term liabilities from other long-term liabilities of the government? How would...
How would you distinguish general long-term liabilities from other long-term liabilities of the government? How would financial reporting of general long-term liabilities' reporting differ from other long-term liabilities? Explain. How would you describe the purpose and budgeting (if required or not) of a debt service fund? Explain. How would you explain the concepts of debt limit and borrowing power or debt margin connections? Explain.
If you wanted an LED to flash more or less in a circuit, how would this...
If you wanted an LED to flash more or less in a circuit, how would this be done?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT