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Why Might You Expect Longer-Term Debt Issues to Have More

question 26

Essay

Why might you expect longer-term debt issues to have more bond covenants than
short-term (i.e., no more than one year to maturity)debt issues ?


Definitions:

Risk Premiums

The extra return expected by investors for taking on the risk of an investment compared to a risk-free asset.

Mean-variance Efficient

A portfolio that offers the highest expected return for a defined level of risk or the lowest risk for a given level of expected return.

CAPM

The Capital Asset Pricing Model is a conceptual model employed to calculate the anticipated return on an investment, taking into account both the risk associated with the investment and the time value of money.

Market Portfolio

A theoretical portfolio that includes all assets available in the market, each weighted by its market capitalization, often used in the Capital Asset Pricing Model (CAPM).

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