This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Consider a Sears 9% bond and a US Treasury 9.25% bond both maturing in ten years. The current yield ... (Read 75 times)

mydiamond

  • Hero Member
  • *****
  • Posts: 804
on: Apr 25, 2021
Consider a Sears 9% bond and a US Treasury 9.25% bond both maturing in ten years. The current yield to maturity on the Sears bond is 5.3% compared to the Gov't bond yield of 4.5%. The higher yield on the Sears bond reflects Sears's higher probability of default. Historically, the difference between the yields of the two bonds has been 1.2%. This difference is called the "yield spread." Today the yield spread is only 0.8%. You expect that the yield spread will widen back to its historic value over the next few days. Assume that both yields will change equally to bring the spread back to its historic position and assume that the mid-point of the spread will stay where it is. What is the anticipated price change for the Sears bond and for the US Treasury bond? Assume that both bonds have a face value of $1,000 and that the price value of a basis point (PVBP) is $1.24 for both bonds. (The PVBP is the dollar amount the price will change for each 1 basis point change in the yield.)
◦ Sears -$49.60, Treasury +$49.60
◦ Sears -$24.80, Treasury +$24.80
◦ Sears +$49.60, Treasury -$49.60
◦ Sears +$24.80, Treasury -$24.80
Corporate Finance Online ¦ Eakins, McNally ¦ 2nd Edition
Buy Test-Bank


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by mydiamond on Apr 25, 2021

nanny

  • Sr. Member
  • ****
  • Posts: 313
Reply #1 on: Apr 25, 2021
Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.
Answer Preview
Only 35% of students answer this correctly


mydiamond

  • Member
  • Posts: 804
Reply 2 on: Apr 25, 2021
:D TYSM

flexer1n1

  • Member
  • Posts: 373
Reply 3 on: Yesterday
Gracias!

« previous next »
 

Did you know?

There used to be a metric calendar, as well as metric clocks. The metric calendar, or "French Republican Calendar" divided the year into 12 months, but each month was divided into three 10-day weeks. Each day had 10 decimal hours. Each hour had 100 decimal minutes. Due to lack of popularity, the metric clocks and calendars were ended in 1795, three years after they had been first marketed.

Did you know?

Medication errors are more common among seriously ill patients than with those with minor conditions.

Did you know?

Long-term mental and physical effects from substance abuse include: paranoia, psychosis, immune deficiencies, and organ damage.

Did you know?

According to the Migraine Research Foundation, migraines are the third most prevalent illness in the world. Women are most affected (18%), followed by children of both sexes (10%), and men (6%).

Did you know?

Anesthesia awareness is a potentially disturbing adverse effect wherein patients who have been paralyzed with muscle relaxants may awaken. They may be aware of their surroundings but unable to communicate or move. Neurologic monitoring equipment that helps to more closely check the patient's anesthesia stages is now available to avoid the occurrence of anesthesia awareness.

H. erectus migrated out of Africa beginning about 1.8 million years ago and is first known from Geor H. erectus migrated out of Africa beginning about 1.8 million years ago and is first known from Geor
The 2012 U.S. presidential campaign rang with “get tough” cries to end Iran’s nuclear capacity and c The 2012 U.S. presidential campaign rang with “get tough” cries to end Iran’s nuclear capacity and c
Growth of the body and brain is dramatic over the first 2 years. Growth of the body and brain is dramatic over the first 2 years.
Review Cognitive Changes over the Adult Years Review Cognitive Changes over the Adult Years
Women who reported one, two, or three or more major life events in the past 5 years were ... Women who reported one, two, or three or more major life events in the past 5 years were ...
What atomic or hybrid orbital on P make up the sigma bond between P and Cl in phosphorous ... What atomic or hybrid orbital on P make up the sigma bond between P and Cl in phosphorous ...
Video: Action potentials - electrical characteristics and generation

For a complete list of videos, visit our video library