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An investment banking client is considering issuing a ten-year bond to finance an acquisition and has asked you what the coupon rate would be on par a bond issue to finance the acquisition. Your capital marl

An investment banking client is considering issuing a ten-year bond to finance an acquisition and has asked you what the coupon rate would be on par a bond issue to finance the acquisition. Your capital marl

Essentials Of Investments
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
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An investment banking client is considering issuing a ten-year bond to finance an acquisition and has asked you what the coupon rate would be on par a bond issued to finance the acquisition. Your capital markets team feels like the company could issue at a stripped spread or ZVOAS of 1.25%. What is your estimate of the par coupon rate for a ten-year bond issued by this company given the US Treasury zero coupon bond rates in the table below and the information from the capital markets team? Zero Coupon Bond Rates Years to Maturity Rate 2.80% 2.90% 3.00% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70% 19 10
Transcribed Image Text:An investment banking client is considering issuing a ten-year bond to finance an acquisition and has asked you what the coupon rate would be on par a bond issued to finance the acquisition. Your capital markets team feels like the company could issue at a stripped spread or ZVOAS of 1.25%. What is your estimate of the par coupon rate for a ten-year bond issued by this company given the US Treasury zero coupon bond rates in the table below and the information from the capital markets team? Zero Coupon Bond Rates Years to Maturity Rate 2.80% 2.90% 3.00% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70% 19 10
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