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For this answer we have to know the six categories of premioum:
a. Inflation premium(more risk): high inflation means tha investors will require a higher return in order to invest at a certain project.
b. Maturity premium: the longer the duration of a project, the higher the return that investors will require.
c. Liquidity premium: the excess return that investors will require in order to invest their capital in a less desirable project on a secondary market.
d. Exchange rate risk premium: the excess return that investors will require in order to invest their capital in a foreign financial assets that has volatile exchange rate.
e. default risk premium: .... in order to invest in a more (??) project to default company
f. Real rate of interests
What else can I help you with?
What is the difference between the coupon rate and the interest rate?
Coupon rate is something that is paid semiannually. The interest rate is something that starts as soon as a bond is issued.
What is the difference between coupon rate and market rate of interest?
The coupon rate is the fixed annual interest payment a bond issuer agrees to pay to bondholders, expressed as a percentage of the bond's face value. In contrast, the market rate of interest fluctuates based on prevailing economic conditions and reflects the return investors require for lending their money. When the market rate exceeds the coupon rate, the bond may trade at a discount; when the market rate is lower, the bond may trade at a premium. Essentially, the coupon rate is set at issuance, while the market rate varies over time.
What is the difference between federal funds rate and the discount rate?
The Federal Funds rate abbriviated as Fed Funds is the overnight loan rate between banks. The Discount Window is the Federal Reseve Bank of New York's overnight interst rate charged to banks from the Federal Reserve, called the discount window rate.
What is the relationship between required rate of return and coupon rate on the value of bond?
The relationship between the required rate of return and the coupon rate significantly affects a bond's value. If the required rate of return is higher than the coupon rate, the bond will typically trade at a discount, as investors seek higher yields elsewhere. Conversely, if the required rate of return is lower than the coupon rate, the bond will trade at a premium, since it offers more attractive returns relative to current market rates. Thus, changes in the required rate of return directly influence the bond's market price.
Difference enters bond's coupon interest rate the current yield y bond-holder's required rate of return?
Difference enters bond's coupon interest rate the current yield y bondholder's required rate of return?
What is the difference between the coupon rate and discount rate in financial investments?
The coupon rate is the fixed interest rate paid on a bond, while the discount rate is the rate used to calculate the present value of future cash flows in an investment.
Distinguish between deep discount bond and zero coupon bond?
the main difference between deep discount bond and zero coupon bond is that in case of zero coupon bond no int is payable periodically while in case of deep discount bond int is payable periodically at very lower rate say 2% per annum
What is the difference between yield and coupon rate?
The difference between the coupon rate and the required return of a bond is dependent upon the type of bond. Junk bonds will have the biggest difference between its return and the coupon rate.
What is the difference between the coupon rate and the interest rate?
Coupon rate is something that is paid semiannually. The interest rate is something that starts as soon as a bond is issued.
What is the difference between profit maximization and value maximization?
discount rate
What is the difference between the coupon rate and the interest rate in a financial instrument?
The coupon rate is the fixed rate of interest that a bond pays out annually, while the interest rate is the overall rate that includes the coupon rate and any other potential returns or fees associated with the financial instrument.
What is the difference between coupon rate and market rate of interest?
The coupon rate is the fixed annual interest payment a bond issuer agrees to pay to bondholders, expressed as a percentage of the bond's face value. In contrast, the market rate of interest fluctuates based on prevailing economic conditions and reflects the return investors require for lending their money. When the market rate exceeds the coupon rate, the bond may trade at a discount; when the market rate is lower, the bond may trade at a premium. Essentially, the coupon rate is set at issuance, while the market rate varies over time.
Is the current yield greater than the coupon rate for a discount bond?
yes
Difference between interest rate and discount rate?
Interest rate is the amount that is paid over and above the original loan amount. Discount rate is the amount of money that is cut or reduced from the original price.
Difference between discount rate and interest rate?
Interest rate is the amount that is paid over and above the original loan amount. Discount rate is the amount of money that is cut or reduced from the original price.
What is the difference between federal funds rate and the discount rate?
The Federal Funds rate abbriviated as Fed Funds is the overnight loan rate between banks. The Discount Window is the Federal Reseve Bank of New York's overnight interst rate charged to banks from the Federal Reserve, called the discount window rate.
What is the difference between discount factor and discount rate?
Discount factor is the factor determining future cash flow, but multiplying the cash flow to obtain present value. Discount rate is used in calculations to equal the cost of capital.
