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 76 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

adf223

  • Member
  • Posts: 304
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

Of the estimated 2 million heroin users in the United States, 600,000–800,000 are considered hardcore addicts. Heroin addiction is considered to be one of the hardest addictions to recover from.

Did you know?

Opium has influenced much of the world's most popular literature. The following authors were all opium users, of varying degrees: Lewis Carroll, Charles, Dickens, Arthur Conan Doyle, and Oscar Wilde.

Did you know?

Eating food that has been cooked with poppy seeds may cause you to fail a drug screening test, because the seeds contain enough opiate alkaloids to register as a positive.

Did you know?

The longest a person has survived after a heart transplant is 24 years.

Did you know?

Though methadone is often used to treat dependency on other opioids, the drug itself can be abused. Crushing or snorting methadone can achieve the opiate "rush" desired by addicts. Improper use such as these can lead to a dangerous dependency on methadone. This drug now accounts for nearly one-third of opioid-related deaths.

This older woman is exploring new avenues of enjoyment as she avoids stagnation in her later years This older woman is exploring new avenues of enjoyment as she avoids stagnation in her later years
How long does it take for 90% of a sample of strontium-90 (half-life of 28.8 years) to decay? How long does it take for 90% of a sample of strontium-90 (half-life of 28.8 years) to decay?
Life Cycle Nutrition: Toddlers through the Later Years Life Cycle Nutrition: Toddlers through the Later Years
A current-carrying wire is placed in a uniform magnetic field, as shown below. A current-carrying wire is placed in a uniform magnetic field, as shown below.
A pedigree for albinism collected in the early years of the twentieth century by Charles Davenport, A pedigree for albinism collected in the early years of the twentieth century by Charles Davenport,
Earth 240 Million Years Ago Earth 240 Million Years Ago
Video: Methods that regulate pH

For a complete list of videos, visit our video library