You are a fixed-income portfolio manager and you observe that the market price of a 1.5-year US Treasury Note (T-Note) that pays a 5% coupon is $100.625 (assume par = $100). You also observe that 6 months and 1-year T-Bill rates are respectively, 4 and 4.5%. What is the price of a 1.5-year corporate bond that pays a 7% coupon (paid semi-annual) and trades at a Z-spread of 60bps? (z3=2.285%) and BEY (r3=4.57%)

Answer rating: 100% (QA)

Step 1 Calculate the semiannual yield Yield Yield BEY 1 Zspread Y... View the full answer