A bond has 2 years remaining until maturity. Jake determines that the bond has a 6%...
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A bond has 2 years remaining until maturity. Jake determines that the bond has a 6% default rate on the 3rd and 4th coupon dates, as long as the default has not yet occurred. If a default occurs, the bond will pay no coupon for that period, but will pay 40% of the redemption amount from the sale of bond collateral. The bond has a nominal annual coupon rate of 8%, payable semiannually, and a face amount of 10,000. Using expected present value, what price should Jake pay based on an annual yield of 10% payable semiannually? 2. What is the promised yield (actual defaults = 0) on the bond? %3D A bond has 2 years remaining until maturity. Jake determines that the bond has a 6% default rate on the 3rd and 4th coupon dates, as long as the default has not yet occurred. If a default occurs, the bond will pay no coupon for that period, but will pay 40% of the redemption amount from the sale of bond collateral. The bond has a nominal annual coupon rate of 8%, payable semiannually, and a face amount of 10,000. Using expected present value, what price should Jake pay based on an annual yield of 10% payable semiannually? 2. What is the promised yield (actual defaults = 0) on the bond? %3D
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lets assume coupons are paid semi annually so there are two payments per period FV Face Value 100000 ... View the full answer
Related Book For
Fundamentals of Investments Valuation and Management
ISBN: 978-0077283292
5th edition
Authors: Bradford D. Jordan, Thomas W. Miller
Posted Date:
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