The short term market for corporate debt commercial

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Income Tax Fundamentals 2019
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Chapter 10 / Exercise 15
Income Tax Fundamentals 2019
Whittenburg/Gill
Expert Verified
2. The short-term market for corporate debt (commercial paper) is very sensitive to risk. Whenever the economy weakens, the issuance of commercial paper falls and the “price” of that risk increases as measured by the spread between the 90-day commercial paper rate and the three-month U.S. Treasury bill rate.a. Visit the Federal Reserve’s Web site at and, after clicking on “Economic Research and Data,” find “Selected Interest Rates.” Construct the “risk spread” for the 90-day commercial paper rate minus the three-month T-bill rate and make a plot of the graph of this spread for the past 10 years using the G.13 monthly statistical release.Period90-day Commercial Paper RateThree-month T-bill RateSpread Rate19975.585.070.5119985.505.030.4719994.844.290.5520006.575.790.7820013.963.620.3420021.801.730.0720031.201.070.1320041.060.940.1220053.152.840.3120065.054.720.3320075.234.730.50Spread Rate0.000.200.400.600.801.0019971998199920002001200220032004200520062007PeriodSpread RateSpread Rate8-14
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Income Tax Fundamentals 2019
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Chapter 10 / Exercise 15
Income Tax Fundamentals 2019
Whittenburg/Gill
Expert Verified
Chapter 08 - The Risk Structure of Interest Rates: Defaults, Prepayments, Taxes, and Other Rate-Determining Factorsb. Now locate the volume of “Nonfinancial Commercial Paper Outstanding” on the Fed’s Web site. Plot this information for the same time period.
: c. Visit the National Bureau of Economic Research (NBER) Web site at and locate the onset and end dates for any economic recessions that occurred in the U.S. economy over the past 10 years. Mark these dates on your graphs from parts (a) and (b) above.
d.What are your conclusions regarding how the corporate debt (commercial paper) market responds to economic recessions?
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