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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.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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.
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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