econ330ch7notes

econ330ch7notes - relative risk of treasury bonds goes...

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Chapter 7 Bond ratings – moody's and standard and poor's Ratings group investment grade non-investment – speculative grade highly speculative Corporate bond market re on corporate bonds goes down, Dc goes down, Dc shifts left risk of corporate bonds goes up, Dc goes down, Dc shifts left Pc goes down, ic goes up Treasury Bond Market Relative Re on treasury bonds goes up, Dt goes down, and Dt shifts right
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Unformatted text preview: relative risk of treasury bonds goes down, Dt goes up, and Dt shifts right Pt goes up, and It goes down Outcome Risk Premium i^c-c^T rises Tax Status and Bond Prices Coupon Payments on Municipal bonds are exempt from Federal Tax Payments Tax-exempt Bond Yield = taxable bond yield * (1-tax rate) Taxable bond equivalent yield = (tax-exempt bond yield)/(1-tax rate)...
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This note was uploaded on 10/14/2009 for the course ECON 330 taught by Professor Neri during the Spring '08 term at Maryland.

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