Bonds and Their Valuation Graded Assignment | Read Chapter 7 | Back to Assignmen
ID: 2790919 • Letter: B
Question
Bonds and Their Valuation Graded Assignment | Read Chapter 7 | Back to Assignment Due Saturday 12.02.17 at 11:15 PM Average: 8 Attempts: 5. Types of bonds Fixed-income securities consist of debt instruments and preferred stock. Bonds are debt securities in which a Aa Aa borrower promises to pay a specified interest rate and principal at a future date. Which of the following statements about Treasury bonds is the most accurate? O Treasury bonds are completely riskless. O Treasury bonds have a very small amount of default risk, so they are not completely riskless. O Treasury bonds are not completely riskless, since their prices will decline when interest rates rise. Based on the information given in the following statement, answer the questions that follow: New York City issued a general obligation bond for a canal in 1812. It was the first formal debt instrument with a fixed repayment schedule issued by a city. Who is the issuer of the bonds? What type of bonds are these? O The New York City government O Bank of New York O Federal Reserve Bank of New York O Treasury bonds O Corporate bonds O Municipal bonds WIN 27,0,0,187 33.341 2004-2016 Aplia All rights reserved Grade it Now Save & Continue xcept as noted. All rights reservedExplanation / Answer
Treasury bonds are not completely risk less as their prices decline when interest rates rise. Though treasury bonds are free of default risk ,because of the soverign guarantee that comes with it , the change in interest rate regime can move the prices and cause a small amount of risk.
In the above case , the issuer is Newyork city government which is the local government in the state of Newyork where the bonds have fixed payment schedule and are issued as general obligation. As it is issued by New York city, it is referred to as Municipal bonds.