A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on thecorporate bond is 0.5%. What is the default risk premium on the corporatebond?
Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: The formula to calculate price of bond is given below,
Q: A Treasury bond that matures in 10 years has a yield of 8%. A 10-year corporate bond has a yield of…
A: Solution : Given Treasury bond that matures in 10 years has a yield of 8% 10-year…
Q: A corporate bond has a face value of $1 000, a coupon rate of interest of 10.5% per annum, payable…
A: i. Coupon amount = Face value * Coupon rate Coupon amount = $1000 * 10.5%/2 Coupon amount = $52.50
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Q: yield to maturity
A: Introduction: Yield to maturity is a total return that is earned by the investor from a bond if the…
Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: The coupon is paid on the face value of the bond. Therefore, the coupon of the bond is calculated…
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A: Yield to Maturity (YTM) = Coupon Payment + (Face Value - Market Value)/Years to Maturity/Face Value…
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Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: Coupon amount= 1000*7% =70 YTM=6% Face Value= 1000 Maturity Year Remaining =10-1= 9 years
Q: bond that matures in 8 years has a par value of $1,000 and an annual coupon payment of $70; its…
A: 1) Solved using Financial Calculator N = 8 FV = 1000 PMT = 70 I/Y = 9 CPT PV = - 889.30 Bond is at…
Q: default
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A: It is the difference between the interest rate of a debt instrument and the risk free rate.
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A: Each bond carries annual interest payments that is decided by coupon rate on bonds.
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Q: A Treasury bond that matures in 10 years has a yield of 4.25%. A 10-year corporate bond has a yield…
A: Given information: Nominal yield on T-bond is 4.25% Nominal yield on corporate bond is 8.00%…
Q: A Treasury bond that matures in 10 years has a yield of 6.25%. A 10-year corporate bond has a yield…
A: Corporate bond yield = 10.75% Treasury bond yield (Risk free) = 6.25% Liquidity premium = 0.35%
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Q: A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield…
A: Treasury Bond Yield = 4.75% Corporate Bond Yield = 9.25% Liquidity Risk Premium = 0.60% We know that…
Q: a treasury bond that matures in 10 years has a yield of 6.75%. a 10 year corporate bond has a yield…
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Q: Assume that there is a freshly-issued coupon-bearing bond with a face value of £10,000, which has…
A: Let Sn be the spot rate in year n. Face value (F) = £10000 n = 4 years Coupon (C) = 10% of F = £1000
Q: Suppose that General Motors Acceptance Corporation issued a bond with 10 years until maturity, a…
A: Calculation of price of the bond:Answer:The price of the bond is $1,068.02 immediately after it…
A Treasury bond that matures in 10 years has a yield of 6%. A 10-year corporate bond has a yield of 9%. Assume that the liquidity premium on the
corporate bond is 0.5%. What is the default risk premium on the corporate
bond?
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- a treasury bond that matures in 10 years has a yield of 6.75%. a 10 year corporate bond has a yield of 9.50%. assume that the liquidity premium on the corporate bond is 0.35%. What is the default risk premium on the corporate bond?Assume that the real, risk-free rate of interest is expected to be constant over time at 3 percent, and that the annual yield on a 6-year corporate bond is 8.00 percent, while the annual yield on a 10-year corporate bond is 7.75 percent: you may assume that the default risk and liquidity premium are the same for both bonds. Also assume that the maturity risk premium for all securities can be estimated as MRP, (0.1%) *(t-1), where t is the number of periods until maturity. Finally assume that inflation is expected to be constant at 3 percent for Years 1-6, and then constant at some rate for Years 7-10 (4 years). Given this information, determine what the market must anticipate the average annual rate of inflation will be for Years 7-10. 2.583% O 1979% 2.281% 1.375 % O 1.677 % 4Suppose a 10-year Treasury (risk-free) bond has a YTM of 5% and a Coupon Rate of 5%. Further, a 10-year corporate bond has a YTM of 7% and a coupon rate of 6%. What is the expected risk premium (in dollars) of this bond? a)$44.26 b)$106.18 c)$8.08 d)$71.06
- A Treasury bond that matures in 10 years has a yield of 5.25%. A 10-year corporate bond has a yield of 8.75%. Assume that the liquidity premium on the corporate bond is 0.45%. What is the default risk premium on the corporate bond? Round your answer to two decimal places.If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9.2%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond?A Treasury bond that matures in 10 years has a yield of 8%. A 10-year corporate bond has a yield of 12%and liquidity premium of 2%. What is the default risk premium on the corporate bonds?
- Assume the real risk-free is 1% and the average annual expected inflation rate is 4%. The DRP and LP for bond A are each 3%, and the applicable MRP is 3%. What is Bond A's interest rate?What is a discount ask yield on a bond? if the bond is priced at 1,000 and 80 days to maturity and has a discount ask yield of 3.4%?A 10-year T-bond has a yield of 6%. A 10-year corporate bondwith a rating of AA has a yield of 7.5%. If the corporate bond hasexcellent liquidity, what is an estimate of the corporate bond’sdefault risk premium? (1.5%)
- If 10-year Treasury bonds have a yield of 4.3%, 10-year corporate bonds yield 6.7%, the maturity risk premium on all 10-year bonds is same, and corporate bonds have a 0.3% liquidity premium vs. a zero liquidity premium for T-bonds,what is the default risk premium on the corporate bond?Suppose the yield on a two-year-old Treasury bond is 5 percent and the yield on a one-year Treasury bond is a 4 percent. If the maturity risk premium (MRP) on these bonds is zero (0), what is the expected one-year interest rate during the second year (Year 2)?Bonds have a maturity risk premium that can be modeled as the following:MRP = (t-1) 0.3%were t represents the years to maturity. What is the Maturity risk premium of a bond that matures in 8 years? answer in % without the symbol