Please choose a corporate bond with a maturity of at least two years. Possible sources include...
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Please choose a corporate bond with a maturity of at least two years. Possible sources include Fidelity, Morningstar or other similar services or if you do not have an account, then you can use http://finra-markets.morningstar.com/BondCenter/Default.jsp However, you can choose any other source as well, but make sure you let me know where your data comes from. Also, please find a comparable treasury (using for example, treasury.gov Bloomberg or other sources or the Finra website above). a) First, assume annual coupons for simplicity and calculate the duration and convexity of your bond. b) What would the realized compound yield on your bond be at maturity if the market yield for the bond dropped by 2% immediately (do not worry about fractional years, assume that the drop affects reinvested coupons starting with the next coupon). c) Using the comparable treasury rate as the risk-free rate, please do the following based on class discussion. Assume annual coupons and that the bond may only default at maturity. When it matures can either pay the promised payment or default and pay only principal, with no interest. What is the probability of that occurrence? If you cannot find probabilities that will be compatible with the current prices explain why this is the case. If an analyst suspects that the analysis above is flawed, and that the bond may also default prior to maturity, should they buy or sell the bond? Please choose a corporate bond with a maturity of at least two years. Possible sources include Fidelity, Morningstar or other similar services or if you do not have an account, then you can use http://finra-markets.morningstar.com/BondCenter/Default.jsp However, you can choose any other source as well, but make sure you let me know where your data comes from. Also, please find a comparable treasury (using for example, treasury.gov Bloomberg or other sources or the Finra website above). a) First, assume annual coupons for simplicity and calculate the duration and convexity of your bond. b) What would the realized compound yield on your bond be at maturity if the market yield for the bond dropped by 2% immediately (do not worry about fractional years, assume that the drop affects reinvested coupons starting with the next coupon). c) Using the comparable treasury rate as the risk-free rate, please do the following based on class discussion. Assume annual coupons and that the bond may only default at maturity. When it matures can either pay the promised payment or default and pay only principal, with no interest. What is the probability of that occurrence? If you cannot find probabilities that will be compatible with the current prices explain why this is the case. If an analyst suspects that the analysis above is flawed, and that the bond may also default prior to maturity, should they buy or sell the bond?
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Answer rating: 100% (QA)
I will choose the Verizon Communications Inc 25 corporate bond maturing on 12152023 as the bond to analyze This bond has a coupon rate of 25 and a yield to maturity of 287 The bonds market price is cu... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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