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But isn't it because when you invest in government bonds it's riskfree and therefore is Lokey wrong?
Step by step
Solved in 2 steps
- Why are the bonds treated as a conservative investment? Do you think the treasury bills are risk-free assets?Are risk-free rates really risk free?What are the risks of government securities?Why do we still use government bond yields as our risk-free rates if they still carry risk?Are government bonds ALWAYS less risky than corporate bonds? If yes, please explain. If no, please explain and give an example of an industry whose bonds are less risky then the government's
- Which of the following might discourage covered interest arbitrage even if interest rate parity does not exist? A. transaction costs. B. political risk. C. differential tax laws. D. all of the above. E. none of the above.If a bank finds that its ROE is too low because it has toomuch bank capital, what can it do to raise its ROE?Which of the following is most correct? Treasury bonds carry high default risk because government has the option not to pay its indebtedness. Corporate bonds have lower interest rates compared with treasury bonds because bonds were issued with the aid of financial intermediaries. Corporate bonds have no default risk because they are backed by their corporate assets. Treasury bonds have lower interest rates because they are assumed to carry no default risk.
- Why if your income is in local currency and you issue a bond in dollars, this might be a risky decision? Explain2. If a bank wants to avoid volatility in its regulatory capital, which investment classification would be the most desirable, and which investment classification would be the least desirable? Does your answer differ depending on whether the bank is large or small? In other words, do large and small banks differ on how they can categorize unrealized gains/losses on AFS debt?Why would you expect securitization to take place only in highly developed capital markets?