Build America Mutual (BAM), rated AA, will charge $50,000 to insure $10,000,000 of BBB rated sewer...

 

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Build America Mutual ("BAM"), rated AA, will charge $50,000 to insure $10,000,000 of BBB rated sewer revenue bonds. The current BBB yield curve is pricing with a credit spread of 50bps while th AA curve is pricing at 15bps. Should the University use bond insurance if it is a two year note? Build America Mutual ("BAM"), rated AA, will charge $50,000 to insure $10,000,000 of BBB rated sewer revenue bonds. The current BBB yield curve is pricing with a credit spread of 50bps while th AA curve is pricing at 15bps. Should the University use bond insurance if it is a two year note?

Answer rating: 100% (QA)

SOLUTION To determine whether the University should use bond insurance for the twoyear BBB rated sew... View the full answer