Using Hard Currency Credit Calculator: 10-year US Treasury yields 2.75%. Benin sovereign credit spread is 2.50% above US Treasury. Benin quasi-sovereign credit spread is .50% above Benin’s sovereign spread. Benin BigBank, a private company, has a credit spread .75% higher than the Benin quasi-sovereign spread. Benin BigBank, a private company, has a 10-year US$ bond with an annual coupon of 8.5%. Imagine that US Treasury yields immediately rise to 3.00% and the Benin sovereign and quasi-sovereign spreads do not change. If Benin BigBank’s spread widens to .95% above the quasi-sovereign, what gain or loss should be made on $100 of Benin BigBank’s 10-year bond?
Using Hard Currency Credit Calculator: 10-year US Treasury yields 2.75%. Benin sovereign credit spread is 2.50% above US Treasury. Benin quasi-sovereign credit spread is .50% above Benin’s sovereign spread. Benin BigBank, a private company, has a credit spread .75% higher than the Benin quasi-sovereign spread. Benin BigBank, a private company, has a 10-year US$ bond with an annual coupon of 8.5%. Imagine that US Treasury yields immediately rise to 3.00% and the Benin sovereign and quasi-sovereign spreads do not change. If Benin BigBank’s spread widens to .95% above the quasi-sovereign, what gain or loss should be made on $100 of Benin BigBank’s 10-year bond?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Using Hard Currency Credit Calculator: 10-year US Treasury yields 2.75%. Benin sovereign credit spread is 2.50% above US Treasury. Benin quasi-sovereign credit spread is .50% above Benin’s sovereign spread. Benin BigBank, a private company, has a credit spread .75% higher than the Benin quasi-sovereign spread. Benin BigBank, a private company, has a 10-year US$ bond with an annual coupon of 8.5%. Imagine that US Treasury yields immediately rise to 3.00% and the Benin sovereign and quasi-sovereign spreads do not change. If Benin BigBank’s spread widens to .95% above the quasi-sovereign, what gain or loss should be made on $100 of Benin BigBank’s 10-year bond?
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