Samble (P&G) in return for a spread where the spread is described b quation (1). In other words, the spread represents the interest ayment by P&G to BT. 98.5 * 5 yr USTyield 5.78% 30 yr UST price Spread = ma x| 0, 100 Vhere 5 yr UST Yield is the yield-to-maturity of a 5- year U.S. reasury bond; 30 yr UST price is the price of a 30-year U.S. Treasu ond. he CEO of P&G said that the spread does NOT depend on volatilit f interest rates. Do vou agree? Justify vour answer.
Samble (P&G) in return for a spread where the spread is described b quation (1). In other words, the spread represents the interest ayment by P&G to BT. 98.5 * 5 yr USTyield 5.78% 30 yr UST price Spread = ma x| 0, 100 Vhere 5 yr UST Yield is the yield-to-maturity of a 5- year U.S. reasury bond; 30 yr UST price is the price of a 30-year U.S. Treasu ond. he CEO of P&G said that the spread does NOT depend on volatilit f interest rates. Do vou agree? Justify vour answer.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![In 1993, Bankers Trust (BT) agreed to lend money to Procter and
Gamble (P&G) in return for a spread where the spread is described by
equation (1). In other words, the spread represents the interest
payment by P&G to BT.
98.5 * 5 yr
USTyield
5.78%
30 yr UST price
Spread :
= ma x| 0,
100
Where 5 yr UST Yield is the yield-to-maturity of a 5- year U.S.
Treasury bond; 30 yr UST price is the price of a 30-year U.S. Treasury
bond.
The CEO of P&G said that the spread does NOT depend on volatility
of interest rates. Do you agree? Justify your answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F217ab5d3-50fe-4bbf-ad1b-7cd3f2f677ed%2Ffff4c724-97dc-40f6-81f3-f3382c217c46%2F1su815b_processed.png&w=3840&q=75)
Transcribed Image Text:In 1993, Bankers Trust (BT) agreed to lend money to Procter and
Gamble (P&G) in return for a spread where the spread is described by
equation (1). In other words, the spread represents the interest
payment by P&G to BT.
98.5 * 5 yr
USTyield
5.78%
30 yr UST price
Spread :
= ma x| 0,
100
Where 5 yr UST Yield is the yield-to-maturity of a 5- year U.S.
Treasury bond; 30 yr UST price is the price of a 30-year U.S. Treasury
bond.
The CEO of P&G said that the spread does NOT depend on volatility
of interest rates. Do you agree? Justify your answer.
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