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Why do bond investors have lower required rates of return than do stock investors?
Wiki User
∙ 13y ago
They take less risk, theoretically, so they have lower expectations.
Wiki User
∙ 13y ago
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What is the difference between interest rate risk and reinvestment rate risk?
Reinvestment risk When interest rates are declining, investors have to reinvest their interest income and any return of principal, whether scheduled or unscheduled, at lower prevailing rates.Interest rate risk When interest rates rise, bond prices fall; conversely, when rates decline, bond prices rise. The longer the time to a bond's maturity, the greater its interest rate risk.
How do interest rates affect investment?
When interest rates are high, investors will consider investing in short term investments, instead of long term investments. When interest rates are low, investors will consider investing in bonds because they are safer.
Why do business objectives change?
Is this a semantics question about "objectives" versus some other term like "goals"? Generally, the goal is to make an appropriate rate of return in comparison to other companies in the industry or the economy as a whole and compared to the rates of return investors can earn in correspondinly lo0wer and higher risk endeavors.
When interest rates are higher in the US foreign investors will most likely?
invest in the United States.
How would low interest rates affect airlines?
Low interest rates positively affect airline industries because they lead to the investment of new technology and capital. This will increase the rate of return and increase the value of the infrastructure and services at lower costs, which will induce better quality and higher demand, which will financially benefit the airline industries with lower rates of inflation. High interest rates will actually increase inflation.
Can required rates of return be negative?
yeah
How are bond prices affected when the Federal Reserve lowers the interest rate?
When the Federal Reserve lowers interest rates, the value of outstanding bonds will increase. The increase in the value of bonds is due to the market price of the bonds adjusting to reflect the lower interest rates available on new bonds. Investors with bond holdings enjoy an increase in the value of their holdings when the Fed cuts rates. However, new investors in bonds will receive a lower rate of interest and if the Fed later raises rates, bond investors will experience a decrease in the market value of their bonds.
What is the difference between interest rate risk and reinvestment rate risk?
Reinvestment risk When interest rates are declining, investors have to reinvest their interest income and any return of principal, whether scheduled or unscheduled, at lower prevailing rates.Interest rate risk When interest rates rise, bond prices fall; conversely, when rates decline, bond prices rise. The longer the time to a bond's maturity, the greater its interest rate risk.
How do interest rates affect investment?
When interest rates are high, investors will consider investing in short term investments, instead of long term investments. When interest rates are low, investors will consider investing in bonds because they are safer.
Why is cost associated with internal equity?
nIf managers are investing shareholders' funds, shareholders will expect to earn their required rate of return nFor internal equity, the required rates of return are equivalent to the cost as no issue costs are involved
Explain using economic models how an exchange rate is determined under a floating exchange rate regime What are the factors that can cause an appreciation in exchange rates Malaysia has recently cha?
Exchange rates are determined through supply and demand. An increase in interest rates can appreciate an exchange rate as investors convert their money into that currency to take advantage of a higher return on their money.
What are the different services that a credit union offers beyond a regular bank?
There are three main differences between credit unions and banks. Banks are owned by investors, but credit unions are owned by the members. When a bank makes a profit, the investors get a share, but in a credit union the profits go to the members with lower loan rates and better dividend rates. Credit Unions offer more personalized service since they are smaller.
How do foreign investors who invest in Nigeria and Ghana deal with currency devaluation and inflation risks?
Investors often include foreign or international bonds in their portfolios for a few primary reasons – to take advantage of higher interest rates or yields and to diversify their holdings. However, the higher return expected from investing in foreign bonds is accompanied by increased risk arising from adverse currency fluctuations.
Do fixed bonds have higher rates than bonds with fluctuating interest?
Yes, fixed bonds typically have higher interest rates compared to bonds with fluctuating interest rates. This is because fixed-rate bonds provide more stability and predictability in terms of returns for investors, whereas bonds with fluctuating interest rates, such as variable or floating rate bonds, have rates that can change based on market conditions. Investors are usually compensated for the uncertainty associated with fluctuating interest rates by receiving lower initial interest rates on these types of bonds.
Why do business objectives change?
Is this a semantics question about "objectives" versus some other term like "goals"? Generally, the goal is to make an appropriate rate of return in comparison to other companies in the industry or the economy as a whole and compared to the rates of return investors can earn in correspondinly lo0wer and higher risk endeavors.
Can driver's ed lower insurance rates?
Yes, they can help lower insurance rates, but not usually by a lot. Also female insurance rates are usually lower than male ones.
How would low interest rates affect airlines?
Low interest rates positively affect airline industries because they lead to the investment of new technology and capital. This will increase the rate of return and increase the value of the infrastructure and services at lower costs, which will induce better quality and higher demand, which will financially benefit the airline industries with lower rates of inflation. High interest rates will actually increase inflation.
