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Problem 5. ABC bonds are 10-year, 14% coupon bonds and currently have a rating of BBB. You expect big changes for the company over the
Problem 5. ABC bonds are 10-year, 14% coupon bonds and currently have a rating of BBB. You expect big changes for the company over the next year, and you are certain that exactly one year from now the bonds will be rated AA. Use the table below to estimate your 1-year return if you buy the bonds today and sell them one year from now. Rating Average YTM AA 4.50% A 5.00% BBB 6.00% BB 8.50% B 9.50%
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