A European investor wants to invest on EDF bonds. There are 2 possibilities: 1- EDF 2,5% 2030

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Question:

A European investor wants to invest on EDF bonds. There are 2 possibilities:

1- EDF 2,5% 2030 in Euros. Yield=1,80%

2- EDF 4% 2030 in USD. Spread over US Treasury=150 bps

Data:

a-Euro Swap 10 years trades at 0,8%

b-USD Swap 10 years trades at US Treasury+0,3%

c-Cross Currency Basis Swap EUR/USD trades at -0,50%

What should be the choice of the investor: Compare the Swap Spread (In Euros) for the 2 bonds.

References

• Options, Futures and Other Derivatives: John C. Hull

• Fixed Income Securities: Valuation, Risk Management

Portfolio Strategies: Martellini, Priaulet

Related Book For answer-question

Basic Finance An Introduction to Financial Institutions Investments and Management

ISBN: 978-1111820633

10th edition

Authors: Herbert B. Mayo

See More Books

Posted Date: Sep 05, 2020 08:15 AM

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A European investor wants to invest on EDF bonds. There are 2 possibilities: 1- EDF 2,5% 2030

Question:

Expert Answer:

Comparison of the swap spread in Euros as follows The EDF has coupon rate is 25 2030 and yield is 18... View the full answer

Basic Finance An Introduction to Financial Institutions Investments and Management

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