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how do you solve this question and would we assume that the bonds are being paid semi-annually? 20-year Treasury Yield: 3.85% Spread over Treasury yield

how do you solve this question and would we assume that the bonds are being paid semi-annually? image text in transcribed

20-year Treasury Yield: 3.85% Spread over Treasury yield on AAA Corporate Bond: 50 bps (0.5%) Spread over Treasury yield on BAA Corporate Bond: 75 bps (0.75\%) 1. What is the price of the three bonds if they each have a coupon rate of 5%, and 20 years to maturity? Assume $1000 face value. 2. If the Treasury yield goes up by 1%, but the spreads stay the same, what will be the new prices of each bond? Did the prices increase by the same percentage? 3. Suppose the yield stays at 3.85% and the spreads stay the same for the next year. What is the price of each bond at the end of the year? 4. Continuing #3, what is the return earned on each bond over the year? 20-year Treasury Yield: 3.85% Spread over Treasury yield on AAA Corporate Bond: 50 bps (0.5%) Spread over Treasury yield on BAA Corporate Bond: 75 bps (0.75\%) 1. What is the price of the three bonds if they each have a coupon rate of 5%, and 20 years to maturity? Assume $1000 face value. 2. If the Treasury yield goes up by 1%, but the spreads stay the same, what will be the new prices of each bond? Did the prices increase by the same percentage? 3. Suppose the yield stays at 3.85% and the spreads stay the same for the next year. What is the price of each bond at the end of the year? 4. Continuing #3, what is the return earned on each bond over the year

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