A corporate bond has an effective spread duration of five years and a credit spread of 2.75%
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A corporate bond has an effective spread duration of five years and a credit spread of 2.75% (275 bps).
What is the approximate excess return if the bond is held for six months and the credit spread narrows 50 bps to 2.25%? Assume the spread duration remains at five years and that the bond does not experience default losses.
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Using Equation 9 Spread 0 EffSp...View the full answer
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