A corporate bond with a 4 25 coupon is priced at USD 104 03 This bond's duration is 5 3 What would be the impact on the bondholder's return if the bond's credit spread widens by 75 basis points due to a credit rating downgrade

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Dec 22, 2023

A corporate bond with a 4.25% coupon is priced at USD 104.03. This bond's duration is 5.3. What would be the impact on the bondholder's

A corporate bond with a 4.25% coupon is priced at USD 104.03. This bond's duration is 5.3. What would be the impact on the bondholder's return if the bond's credit spread widens by 75 basis points due to a credit rating downgrade.

Step by Step Solution

★★★★★

3.40 Rating (153 Votes )

There are 3 Steps involved in it

Step: 1

1 Calculate the current approximate yield to maturity YTM Well use a financial calculator ... 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

Step: 3

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

Essentials of Investments

Authors: Zvi Bodie, Alex Kane, Alan J. Marcus

10th edition

77835425, 978-0077835422

More Books

Students also viewed these Finance questions

Question

★★★★★

On June 6, 2012, Universal Bioenergy, Inc. declared a 20% stock dividend. Because it is a 20% dividend, Universal Bioenergy had flexibility to account for this as a small or large stock dividend. Its...

Answered: 1 week ago

Question

★★★★★

You are an intern with Ford Motor Company in its corporate finance division. The firm is planning to issue $50 million of 12% annual coupon bonds with a 10-year maturity. The firm anticipates an...

Answered: 1 week ago

Question

★★★★★

What would be the impact on GNMA pricing if the pass through was not fully amortized? What is the present value of a $10 million pool of 15-year mortgages with an 8.5 percent per year monthly...

Answered: 1 week ago

Question

★★★★★

Do laws provide a complete guide to ethical behavior? Can an activity be legal but not ethical?

Answered: 1 week ago

Question

★★★★★

Use the step-by-step method to find io(t) for t > 0 in the circuit in Fig. P6.28. t=0 200 4 mA o t)

Answered: 1 week ago

Question

★★★★★

13. What are major limitations of using the transportation method for aggregate planning?

Answered: 1 week ago

Question

★★★★★

=+13. In the experiment described in Exercise 3, in fact the study also compared the use of butter or margarine in the recipes. The design was balanced, with each combination of chip type and oil...

Answered: 1 week ago

Question

★★★★★

Peter and Tanya Rothing operated Diamond R Stables near Belgrade, Montana, where they bred, trained, and sold horses. Arnold Kallestad owned a ranch in Gallatin County, Montana, where he grew hay and...

Answered: 1 week ago

Question

★★★★★

Day and night formed an accounting partnership in 2014. Capital transactions for Day and Night during 2014 are as follows: Transaction Amount Date Day 1/1 4/1 6/1 11/1 Beginning balance Withdrawal...

Answered: 1 week ago

Question

★★★★★

A portfolio manager has maintained an actively managed portfolio with a beta of 0.1. During the last year, the risk-free rate was 2.5% and major equity indices performed very badly, providing returns...

Answered: 1 week ago

Question

★★★★★

Based on the information given in the figure, determine the necessary power input to the compressor (Win). Yout=26 kJ/kg P = 600 kPa T2=600 K Air m = 0.02 kg/s P = 100 kPa T = 480 K Win = ?

Answered: 1 week ago

Question

★★★★★

Read the article, "This Map Shows the Scale of the 16th- and 17th-Century Scottish Witch Trials" located in the module resources. When reviewing this article, you may consult the map or the text. As...

Answered: 1 week ago

Question

★★★★★

Suppose that L is a location function of an object, given as L(t) instantaneous velocity of the object at t First we compute and simplify L(5+ h). L(5+ h) = = 2t 1. We will compute the 5 as follows....

Answered: 1 week ago

Question

★★★★★

Use the following account balances from the adjusted trial balance of Flora Wholesalers: Account Debit Balance Credit Balance Cash $ 4,200 Accounts receivable $ 300 Accounts payable $ 1,100 H. Jones,...

Answered: 1 week ago

Question

★★★★★

A physician hopes to advocate for a new medical records system that he believes will save his department money. He has a good idea of the money that can be saved each year, and has received several...

Answered: 1 week ago

Question

★★★★★

Cullumber's Style manufactures dining room tables for both home and restaurant locations. Robert Michael, the company's controller, developed the following standard costs for each 5-foot table. Ms....

Answered: 1 week ago

Question

★★★★★

Discuss whether responsible human resources management should apply different standards for the home company and suppliers, for developed countries and developing countries, and for large companies...

Answered: 1 week ago

Question

★★★★★

Recalculate the intrinsic value of GE's shares using the free cash flow model of Spreadsheet 13.2 (available in Connect; link to Chapter 13 material). Treat each scenario independently. a. GE's P/E...

Answered: 1 week ago

Question

★★★★★

The following is part of the computer output from a regression of monthly returns on Waterworks stock against the S&P 500 Index. A hedge fund manager believes that Waterworks is underpriced, with an...

Answered: 1 week ago

Question

★★★★★

Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: a. What are the betas of the two stocks? b. What is the expected rate...

Answered: 1 week ago

Question

★★★★★

Pain-Free Dental Group Inc. purchased dental supplies of $18,200 during the year. At the end of the year, a physical count of supplies showed $4,125 of supplies on hand. Required: 1. Prepare the...

Answered: 1 week ago

Question

★★★★★

Nichols Company had the following items that required adjustment at December 31, 2019. a. Electricity used during December was estimated to be $320. This amount will be paid in January. b. Owed wages...

Answered: 1 week ago

Question

★★★★★

Refer to the information for Sparrow Company on the previous page. Refer to previous page. Sparrow Company had the following adjusted trial balance at December 31, 2019. Sparrow Company Adjusted...

Answered: 1 week ago

Previous Question Next Question