Your client has guidelines for you to only buy investment-grade long duration corporate bonds when spreads are 2% spread to 10-year Treasury bonds. 10-year Treasury rates are 4%. What required yield are you looking for the long duration corporate bond to have based on these guidelines? You find a corporate rate at 7% for a BB-rated bond. Do you buy the bond for him? Why or why not?
Your client has guidelines for you to only buy investment-grade long duration corporate bonds when spreads are 2% spread to 10-year Treasury bonds. 10-year Treasury rates are 4%. What required yield are you looking for the long duration corporate bond to have based on these guidelines? You find a corporate rate at 7% for a BB-rated bond. Do you buy the bond for him? Why or why not?
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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4. Your client has guidelines for you to only buy investment-grade long duration corporate
bonds when spreads are 2% spread to 10-year Treasury bonds. 10-year Treasury rates
are 4%. What required yield are you looking for the long duration corporate bond to
have based on these guidelines? You find a corporate rate at 7% for a BB-rated bond. Do
you buy the bond for him? Why or why not?
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