A bank issues a 5-year bond that pays 3-month Euribor plus 50 basis points on a quarterly basis. The bond is issued at its par value. An investor purchases €100m of this bond in the primary market, estimate the interest rate and credit spread durations plus the PV01 and CS01 sensitivities for this holding. State any assumptions you make in making these estimates.

A bank issues a 5-year bond that pays 3-month Euribor plus 50 basis points on a quarterly basis. The bond is issued at its par value. An investor purchases €100m of this bond in the primary market, estimate the interest rate and credit spread durations plus the PV01 and CS01 sensitivities for this holding. State any assumptions you make in making these estimates.

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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