Question
Hello, I need help with this: Mr. A bought the following bond in Apr 18: $17m hold in $100m bond issued by a North American
Hello, I need help with this:
Mr. A bought the following bond in Apr 18:
$17m hold in $100m bond issued by a North American gas storage company.
The bond has a 4% fixed coupon and matures in Dec 23.
The bond was purchased at 97c to result in an initial yield to maturity of 5.3%.
The bond is illiquid and accordingly the Comparable Bond Approach will be utilised to fair value the position as at 30th September 2020. The available comparable bonds are:
Comparator | Sector | Region | Currency | Coupon | Yield | Maturity |
1 | Healthcare | USA | USD | 2.0% | 5.1% | Dec-22 |
2 | Energy | UK | GBP | 4.0% | 4.9% | Jun-21 |
3 | Energy | Canada | USD | 8.0% | 3.8% | Dec-25 |
4 | Energy | USA | USD | 0.0% | 1.2% | Dec-20 |
5 | Healthcare | USA | EUR | 3.0% | 5.2% | Dec-21 |
6 | Energy | Canada | USD | 7.0% | 10.5% | Aug-22 |
7 | Energy | USA | USD | 0.0% | 5.6% | Dec-30 |
1. How many and which bond(s) would you select as the comparable bond(s)?
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