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Credit Risk Homework - #1 Using the following structure of interest rates: T=1 to T=2 T=1 to T=3 T=1 to T=4 T=1 to T=5 AAA
Credit Risk Homework - #1 Using the following structure of interest rates:
T=1 to T=2 | T=1 to T=3 | T=1 to T=4 | T=1 to T=5 | |
AAA | 3.60 | 4.17 | 4.73 | 5.12 |
AA | 3.65 | 4.22 | 4.78 | 5.17 |
A | 3.72 | 4.32 | 4.93 | 5.32 |
BBB | 4.10 | 4.67 | 5.25 | 5.63 |
BB | 5.55 | 6.02 | 6.78 | 7.27 |
B | 6.05 | 7.02 | 8.03 | 8.52 |
CCC | 15.05 | 15.02 | 14.03 | 13.52 |
Price a 5-year bond with a 100 par value and annual 6% coupon if it obtains a B credit rating at the end of year 1. Please state the price in time 1 (i.e., future value) terms. Show ALL work.
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