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finance_assignment3-2 - Municipal bonds are “debt...

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Finance Assignment 3-2 Page 43 1. iR = I – E(INF) 6% = I – 2% Nominal interest rate = 8% 2. iR = 9% - 3% Real interest rate = 6% Knowing the real and nominal interest rates for each of these problems is crucial to the importance to decision making for any business. The interest rate is what it’s all about!! Finding which financial institution has the best rates! Page 74 4. A corporate bond is “a bond issued by corporations in need of long-term funds”.
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Unformatted text preview: Municipal bonds are “debt securities issued by state and local governments, which can usually be classified as either general obligation bonds or revenue bonds”. A municipal bond at 7% is smarter to invest in than purchasing a corporate bond at 11%. 6. a) 6-4=2 liquidity premium b) 8-4=2 liquidity premium...
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