At the height of the Mexican peso crisis in January 1995, the default probabilities on U.S. dollardenominated
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At the height of the Mexican peso crisis in January 1995, the default probabilities on U.S. dollardenominated emerging-market bonds were quite high. A British investment bank, assuming that these bonds would pay 15 cents on the dollar upon default, calculated a 61% chance of default on Venezuelan bonds. Consider a bond with 5 years left to maturity, paying a coupon of 12%. The par value is 80% collateralized by American Treasury bonds. Assume that the U.S. interest rate is 5% for all maturities. What is the price of a bond with $100 par?
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...
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International Financial Management
ISBN: 978-0132162760
2nd edition
Authors: Geert Bekaert, Robert J. Hodrick
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