If 10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 11.9%, thematurity 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 riskpremium on the corporate bond?6.41%5.35%4.40%5.46%5.30%

The extra return that investors need to offset the risk of a bond or loan default is known as the…

Answered: If 10-year T-bonds have a yield of…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The following information is regarding outstanding bonds issued by Midas Corp. Coupon (%) Maturity Yield to Maturity (%) Fitch Ratings 6.75 2029 3.85 4.95 2044 4.32 a. Discuss the relation among the coupon rate, price, and yield for the bond maturing in 2029. Price 130.50 115.75 A A
7.6 For a particular bond market, zero-coupon bonds with face value $100, re-deemable at par, are priced as follows: • bonds redeemable in exactly 1 year are priced at $98, • bonds redeemable in exactly 2 years are priced at $93, • bonds redeemable in exactly 3 years are priced at $89, • bonds redeemable in exactly 4 years are priced at $85.50. Find the yield to maturity of a bond redeemable at 103% of the face value in 4 years with annual coupons of 5%.
If 10-year T-bonds have a yield of 4.0%, 10-year corporate bonds yield 7.6%, the maturity risk premium on all 10-year bonds is 1.3%, and corporate bonds have a 0.23% liquidity premium versus a zero liquidity premium for T-bonds, what is the default risk premium on the corporate bond? Round 2 decimal places
Long-term treasury bonds have 6% yield, while long-term corporate bonds have 10% yield. Default risk premium for long-term corporate bonds is 3%. What is the long- term corporate bonds liquidity premium? 4% 2% 3% 1%
What is the yield on a corporate bond with a $1000 Face value purchased at a discount Price of $850, if it pays 7% fixed interest for the duration of the bond?
The yield to maturity is 10%. The.corporate tax rate is 31%. What would be the approximate after-tax cost of debt for a new issue of bonds? O 5.28% O 248% O 6.90% O 3.14%
Maturity (years) Price 2.83% 5.79% The above table shows the price per $100-face value bond of several risk-free, zero-coupon bonds. What is the yield to maturity of the four-year, zero- coupon, risk-free bond shown? 2.85% 12.07% 1 $97.25 2.89% 3 2 $94.53 $91.83 5 4 $89.23 $87.53
A bond with a 9-year duration is worth $1,086, and its yield to maturity is 8.6%. If the yield to maturity falls to 8.38%, you would predict that the new value of the bond will be approximately $1,083.61 $1,086.00 $1,105.77 $1,088.39
f10-year T-bonds have a yield of 6.2%, 10-year corporate bonds yield 9%, the maturity risk premium on all 10- ear bonds is 1.3%, and corporate bonds have a 0.4% liquidity premium versus a zero liquidity premium for T- Donds, what is the default risk premium on the corporate bond? Select the correct answer. O a. 2.64% O b. 2.16% Oc2.88% d. 2.40% e. 3.12%
What is assumed the be the face value aka par value aka principal aka loan amount of a bond? It's also assumed to be a bond's FV. 10% $0 $100 $1,000
Suppose 10-year T-bonds have a yield of 5.30% and 10-year corporate bonds yield 8.90%. Also, corporate bonds have a 0.25% liquidity premium versus a zero liquidity premium for T-bonds, and the maturity risk premium on both Treasury and corporate 10- year bonds is 1.15%. What is the default risk premium on corporate bonds? A) 3.08% B) 3.35% 2.95% D) 4.12% E) 3.12%
You have just been offered a $1,000 par value bond for $847.88. The coupon rate is 8 percent, payable annually, and annual interest rates on new issues of the same degree of risk are 10 percent. You want to know how many more interest payments you will receive, but the party selling the bond cannot remember. Can you determine how many interest payments remain?

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