Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

I received an answer on the following question that i didn't get: The Polish government is about to issue a new 10-year sovereign bond. According

I received an answer on the following question that i didn't get:

The Polish government is about to issue a new 10-year sovereign bond. According to financial specialists, investors will require a 5% return on their investment in this bond, whereas investors require only a 2% return on a German government bond with the same characteristics. However, an employee in the Ministry of Finance suggests that Poland should change its public debt estimation method. As a result of this reform, nothing would change in the Polish economy apart from the reported level of public debt. According to the Ministry of Finance, investors would require a lower return on the 10-year Polish bond, if the new public debt, estimated with the new method, is lower.

Do you agree?

The answer:

image text in transcribed

image text in transcribed

image text in transcribed

Could another please try answering the question, in another way or further clarify the answer above. Thanks in advance!

introduction A soverign boud is a dubt secinty ulveh will be issued by a national gover ment in order to raied money far - Prancing government progoams. Explanation Bond =10 year soveng n bond. Total retus =2% (german) But the total Retur on the bask Strategy will be = 5\% retur on the miestmout . So, for example if the bond price is 1000 . and the vetin requined =57. a but the german netur gap=(52)=3% So, the compensation from the poland bond P.T.O; Bond yelld fermulce =Boudpreo.AnualCouponpayment =10003%=10093%=0.03. Tucr are different stralegies on the basis of winch tue efficaey will be leaduef towords mens poland yel1d for implication af 3%. introduction A soverign boud is a dubt secinty ulveh will be issued by a national gover ment in order to raied money far - Prancing government progoams. Explanation Bond =10 year soveng n bond. Total retus =2% (german) But the total Retur on the bask Strategy will be = 5\% retur on the miestmout . So, for example if the bond price is 1000 . and the vetin requined =57. a but the german netur gap=(52)=3% So, the compensation from the poland bond P.T.O; Bond yelld fermulce =Boudpreo.AnualCouponpayment =10003%=10093%=0.03. Tucr are different stralegies on the basis of winch tue efficaey will be leaduef towords mens poland yel1d for implication af 3%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions