A United Statesbased issuer has the following option-free bonds outstanding: Current on-the-run US Treasury YTMs are as
Question:
A United States–based issuer has the following option-free bonds outstanding:
Current on-the-run US Treasury YTMs are as follows:
An investor considers the purchase of a new 10-year issue from the company and expects the new bond to include a 10 bp new issue premium. What is the fair value spread for the new issue based on outstanding debt?
Transcribed Image Text:
Outstanding Debt 2-year issue 5-year issue 15-year issue Term Coupon 2 4.25% 5 3.25% 15 2.75% Price 106.7 106 91 YTM 0.864% 1.984% 3.528%
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