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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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