In mid 2012, Ralston Purina had AA rated, 10 year bonds outstanding with a yield to maturity of 2 05 a What is the highest expected return these bonds could have b At the time, similar maturity Treasuries have a yield of 1 5 Could these bonds actually have an expected return equal to your answer in...

In mid-2012, Ralston Purina had AA-rated, 10-year bonds outstanding with a yield to maturity of 2.05%. a.

Question:

In mid-2012, Ralston Purina had AA-rated, 10-year bonds outstanding with a yield to of 2.05%.
a. What is the highest these bonds could have?
b. At the time, similar Treasuries have a yield of 1.5%. Could these bonds actually have an equal to your answer in part (a)?
c. If you believe Ralston Purina's bonds have 1% chance of default per year, and that expected loss rate in the event of default is 40%, what is your estimate of the for these bonds?
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...