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 103 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
Excellent

patma1981

  • Member
  • Posts: 292
Reply 3 on: Yesterday
Gracias!

« previous next »
 

Did you know?

In 2012, nearly 24 milliion Americans, aged 12 and older, had abused an illicit drug, according to the National Institute on Drug Abuse (NIDA).

Did you know?

If you use artificial sweeteners, such as cyclamates, your eyes may be more sensitive to light. Other factors that will make your eyes more sensitive to light include use of antibiotics, oral contraceptives, hypertension medications, diuretics, and antidiabetic medications.

Did you know?

Fewer than 10% of babies are born on their exact due dates, 50% are born within 1 week of the due date, and 90% are born within 2 weeks of the date.

Did you know?

According to animal studies, the typical American diet is damaging to the liver and may result in allergies, low energy, digestive problems, and a lack of ability to detoxify harmful substances.

Did you know?

The highest suicide rate in the United States is among people ages 65 years and older. Almost 15% of people in this age group commit suicide every year.

History of the number of observed sunspots during the last 250 years, which shows the ~11-year solar History of the number of observed sunspots during the last 250 years, which shows the ~11-year solar
Atmospheric CO2 Concentrations Increased Very Rapidly during the Last 200 Years Atmospheric CO2 Concentrations Increased Very Rapidly during the Last 200 Years
VESPR Chart. My favorite for many years VESPR Chart. My favorite for many years
“Career choice” for many women means leaving their paid jobs for a number of years when they ... “Career choice” for many women means leaving their paid jobs for a number of years when they ...
Trends in employed mothers with a child/children younger than 3 years of age Trends in employed mothers with a child/children younger than 3 years of age
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.
Video: The Lagging Strand in DNA Replication and Replication in Action

For a complete list of videos, visit our video library