10-year US Treasury yields 2.60%. Benin sovereign credit spread is 2.50% above US Treasury. Benin quasi-sovereign credit...
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Question:
10-year US Treasury yields 2.60%. Benin sovereign credit spread is 2.50% above US Treasury. Benin quasi-sovereign credit spread is .50% above Benin’s sovereign spread. Benin BigBank, a private company, has a credit spread .75% higher than the Benin quasi-sovereign spread. Benin BigBank, a private company, has a 10-year US$ bond with an annual coupon of 8.5%. Imagine that US Treasury yields immediately rise to 3.00% and the Benin sovereign and quasi-sovereign spreads do not change. If Benin BigBank’s spread widens to .95% above the quasi-sovereign, what gain or loss should be made on $100 of Benin BigBank’s 10-year bond?
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