Question
4 Estimating yield for a hypothetical bond (7 points) estimate the yield for a bond with the following characteristics: maturity: 10 years coupon: 2.5% amount:
4 Estimating yield for a hypothetical bond (7 points) estimate the yield for a bond with the following characteristics:
maturity: 10 years
coupon: 2.5%
amount: $750,000,000 5
currency: US dollars
seniority: senior unsecured
Moody's (Issue) credit rating: Aa2
sector: Electronics
domicile: USA
convertible: no
callable: yes
puttable: no
market of issue: global.
To ensure that the results are robust, estimate at least 3 regression models (e.g., in the rst regression model, one includes amount in $, in the second model, one uses the natural logarithm of amount in $, and the third model features something else). Briey discuss the determinants of yield.
Using one of the regression models, compute two additional yields:
1. the amount is $1,000,000,000, other bond characteristics the same as above
2. Moody's (Issue) credit rating is A2, other bond characteristics the same as above (i.e., amount: $750,000,000 etc.).
Are the results the same as the main estimate? Why?
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