Question: Assume you buy 15mm of a bond at par with a 4.5% coup at a price of 100 Assume we put up 10mm and borrowed

Assume you buy 15mm of a bond at par with a 4.5% coup at a price of 100

Assume we put up 10mm and borrowed 5mm to pay for bond

I would like to be able to adjust my cost of borrow...so effectively I am earning 4,50% on 15 mmand paying some cost on 5mm...I would like to be able to change the cost of borrow and then solve for my return which would be the coupon I earn minus the cost of borrow

Finally I would like to calculate a "breakeven"....Effectively looking at how much I earn (coupon X15mm - cost of borrow x5mm) for 5yrs...then determine how much the bonds can decline in price for me to have a zero return.So that would be initial trade 15mm minus the 5mm I borrowed minus my net earnings should come up with a value...which would be the price I break even at? what is the formula i will need to use when doing this problem.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

Assume you buy 15mm of a bond at par with a 4.5% coup at a price of 100 Assume we put up 10mm and borrowed 5mm to pay for bond I would like to be able to adjust my cost of borrow...so effectively I...

Hello my friend please assist me with my discussion Interest Rates Negotiation is a soft skill that might just be one of the most important skills you will ever learn. For this Discussion you will...

I must have the formulas and where the numbers go in the formula and the answers for all questions. A2. (Bond valuation) Find the missing information for each of the following bonds. The coupons are...

Please, I need help with the calculations for the following 25 problems in the "final" tab of the workbook before 9pm CST. FINC 340 Quizzes 1 2 Derivatives can be strictly defined as Financial...

can any expert help me to work on the questions below?? i need it done correctly as soon as possible FINC 340 Quizzes 1 2 Derivatives can be strictly defined as Financial intermediaries are extremely...

Please provide excel spreadsheet detailing how you got to the multiple choice answer. I am trying to get ahead and understand each of the practiceproblems in prep for a exam so it would be very...

Need to complete 10 homework but now i need 5 homework then after some time 5 homework more. Here it is attachment. Chapter 5 HW Questions [ALL OF THESE MUST BE DONE IN EXCEL] 1. Future value: Chuck...

Can someone help me with this? I need it by tomorrow chapter 2 Issues in Accounting for Corporate Debt and Equity istockphoto Learning Objectives Be able to articulate the advantages and...

Listen to the following videos and then complete the assignments using the changed numbers on the guidance report. Place your answers on the guidance report. Open the Guidance Report and rework the...

On January 3, 2021, Michelson & Sons acquired a tract of land just outside the city limits. The land and existing building were purchased for $2.4 million. Michelson paid $400,000 and signed a...

Jim Harrod knew that service, above all, was important to his customers. Jim and Becky Harrod had opened their first store in Omaha, Nebraska in 1997. Harrods carried a full line of sporting goods...

How widely used is real option analysis? What techniques can be used to analyze real options?

The force constant of a massless spring is 2 5 . 0 N / m . A mass of 0 . 4 5 kg is oscillating in simple harmonic motion at the end of the spring

4. For the budgetary year ending December 31, 2016. Emerald Citys general fund expects the following inflows of resources: Property taxes, licenses, and fees $9,000,000 Proceeds of debt issue...

E 20-2 Multiple choice 1. The accounts estimated revenues and appropriations appear in the trial balance of the general fund. These accounts indicate: a The use of cash-basis accounting b The use of...

2. When a complete system of encumbrance accounting is used, the authorizations remaining available for expenditures at any interim date will be equal to: a Appropriations less encumbrances b...