A firm issues bonds with a coupon rate of 6% paid annually, having a credit rating of
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A firm issues bonds with a coupon rate of 6% paid annually, having a credit rating of BBB, a par value of 1000, and maturity of 7 years. BBB rated bonds are trading at a spread of 3% over YTM on similar maturity treasury notes. New treasury notes of similar maturity are being issued at par at a coupon rate of 7%.
What is the YTM on the treasury bonds? Why?
What is the IRR of buying the bond today and selling the bond after 3 years?
Related Book For
Foundations of Financial Management
ISBN: 978-1259024979
10th Canadian edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen, Doug Short, Michael Perretta
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