Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1.) If bond price is P95,200 against its face value of P100,000, is it worth buying this bond? Assuming that the coupon rate is 4.2%

1.) If bond price is P95,200 against its face value of P100,000, is it worth buying this bond? Assuming that the coupon rate is 4.2% and the prevailing interest rate of alternative investment is 4.9% (risk-free rate). The bond is expected to mature one year from now with a default rate of 3%. What is the current yield? (note: your answer must me rounded of to two decimal places then write the % sign; for example: 1.13%)

2.) Based on question above, what is the yield to maturity (note: your answer must me rounded of to two decimal places then write the % sign; for example: 1.13%) what is the yield to maturity adjusted with default risk?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Finance Book

Authors: Stuart Warner, Si Hussain

1st Edition

1292123648, 978-1292123646

More Books

Students also viewed these Finance questions