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please help with this finance exercise! Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for
please help with this finance exercise!
Instructions: The yield of the 10-year US Treasury bond is 1.20%. It is the risk-free rate. You work for investment manager and your boss asks you to calculate the price of a 10-year corporate bond that yields 3.00% more than its risk-free rate and has a face value of $1,000. The fixed coupon of this corporate bond is 5.00%. Both bonds pay coupons annually. - What is the current price of the corporate bond? - Calculate the price of the bond if its yield increased by 1.00%. - Calculate the price of the bond if its yield decreased by 1.00%. - Please discuss the risk associated with this change in interest rates? - Would you consider purchasing this bond in an inflationary environment? Why or why not Step by Step Solution
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