Real risk-free rate (r") = 3.0%Expected inflation rates: Year 1 = 3.0 % , Year 2-3.5%, Year 3 = 4.0%, Year 4- 4.0%, Year 5 and after = 4.5%- Liquidity premium (LP) - 0.5%IMMaturity risk premium (MRP) = 0.05 x (t-1)%Default risk premium (DRP) = 2.5%What is the corporate bond yield spread?3.50%O 3.00%2.45%5.5%

First, we calculate the corporate bond yield for the given years and then subtract the yields…

Real risk-free rate (r) - 3.0% - Expected inflation rates: Year 1-3.0 % , Year 2-3.5%, Year 3 - 4.0%, Year 4-4.0%, Year 5 and after - 4.5% - Liquidity premium (LP) - 0.5% Maturity risk premium (MRP) = 0.05 x (t-1)% Default risk premium (DRP) - 2.5% What is the corporate bond yield spread? 3.50% 3.00% 2.45% 5.5%

Real risk-free rate (r) - 3.0% - Expected inflation rates: Year 1-3.0 % , Year 2-3.5%, Year 3 - 4.0%, Year 4-4.0%, Year 5 and after - 4.5% - Liquidity premium (LP) - 0.5% Maturity risk premium (MRP) = 0.05 x (t-1)% Default risk premium (DRP) - 2.5% What is the corporate bond yield spread? 3.50% 3.00% 2.45% 5.5%

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 maturity risk premium for Vonda bonds are 3%, default risk premium for Vonda bonds are 4%, and the liquidity risk premium for Vonda bonds are 2%. The real rate of return is 3% and the inflation premium is 3%. What is the nominal rate of return?
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following questions: a. What is the mid-rate for each maturity? b. What is the annual forward premium for all maturities? (Click on the icon to import the table into a spreadsheet.) Period spot 1 month 2 months 3 months 6 months 12 months 24 months Period Bid Rate Spot 1.3267 1.3265 1.3263 1.3259 1.3250 1.3228 1.3179 a. What is the mid-rate for each maturity? Calculate the mid-rate for each maturity below: (Round to five decimal places.) Days Forward Ask Rate 0 1.3268 1.3266 1.3264 1.3262 1.3252 1.3233 1.3207 Bid Rate US$/€ 1.3267 Ask Rate US$/€ 1.3268 Mid-rate US$/€
Assume that thr nominal interest rate is 14%, the risk premium is 4% and real interest rate is 3%, find the inflation rate and the risk free interest rate.
Can you please walk me through this? Problem 6-11 DEFAULT RISK PREMIUM A company’s 5-year bonds are yielding 7.75% per year. Treasury bonds with the same maturity are yielding 5 2% per year, and the real risk-free rate (r*) is 2.3%. The average inflation premium is 2 5%; and the maturity risk premium is estimated to be 0.1 x (t 1) %, where t = number of years to maturity. If the liquidity premium is 1%, what is the default risk premium on the corporate bonds?
The rate of return on which one of the following has a risk premium of 0%? Multiple Choice Long-term government bonds Long-term corporate bonds Intermediate-term government bonds U.S. Treasury bills Large-company stocks
Please solve these 2 problems
1
Borrower Inc. is currently estimating the value of its bonded indebtedness with the following information: Real risk-free rate is currently estimated at 4.25% The expected inflation premium is at 1.75% Considering the current creditworthiness of Borrower Inc., it's credit spread is estimated at: 2.0% for 3-year maturity instruments 3.0% for 4-year maturity instruments 4.0% for 5-year maturity instruments Borrower Inc. have the following issued bonded indebtedness: Bond A carries a 5-year tenor with a face value of Php500,000 issued 2 years ago carrying a coupon of 8.0% per annum. Bond B carries a 5-year tenor with a face value of Php600,000 issued a year ago carrying a coupon of 10.0% per annum. Bond C carries a 8-year tenor with a face value of Php400,000 issued 3 years ago carrying a coupon of 11.5% per annum. 1. What is the value of Bond A? Clue - correct answer should have a string of number "00" appearing in sequence in any unit until two decimal points. 2. What is the…
Borrower Inc. is currently estimating the value of its bonded indebtedness with the following information: Real risk-free rate is currently estimated at 4.25% • The expected inflation premium is at 1.75% Considering the current creditworthiness of Borrower Inc., it's credit spread is estimated at: o 2.0% for 3-year maturity instruments o 3.0% for 4-year maturity instruments o 4.0% for 5-year maturity instruments Borrower Inc. have the following issued bonded indebtedness: Bond A carries a 5-year tenor with a face value of Php500,000 issued 2 years ago carrying a coupon of 8.0% per annum. Bond B carries a 5-year tenor with a face value of Php600,000 issued a year ago carrying a coupon of 10.0% per annum. Bond C carries a 8-year tenor with a face value of Php400,000 issued 3 years ago carrying a coupon of 11.5% per annum. What is the value of Bond A? Clue - correct answer should have a string of number "00" appearing in sequence in any unit until two decimal points.
Give typing answer with explanation and conclusion
Given the following data: Period Years to maturity Yield Par Value (K) Bond Price (K) 1 0.5 8.0% 1,000 1,000 2 1 8.05% 1,000 1,000 3 1.5 8.1% 1,000 1,000 4 2 8.12% 1,000 1,000 5 2.5 8.22% 1,000 1,000 Determine the spot rates for 6-months, 1 year, 1.5 years, 2 years and 2.5 years.

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