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The coupon rate is 5 percent, coupons are paid once a year and the first coupon comes at the end of year 1. Hint: to
The coupon rate is 5 percent, coupons are paid once a year and the first coupon comes at the end of year 1. Hint: to do concrete calculations, you might want to choose a round number, like $1,000 or $1 million for the face value of the bonds. a. Calculate the percentage loss in price of the 30-year U.S. treasury from the lowest yielding day (12/3/21) to the highest-yielding day (10/24/22). b. On 12/3/21, the 5-year U.S. treasury bond was yielding 1.13 percent, and on 10/24/22 was yielding 4.36 percent. Calculate the percentage loss in price of the 5 -year treasury between those two dates. c. Now suppose the Brazilian 5-year bond was trading at a credit spread of 500 basis points (5 percent) to the U.S. treasury on 12/3/21. What then, would be the yield on that Brazilian bond on that day (not a trick question ... it really should be very easy). d. Now calculate what the yield would have to have been on the Brazilian 5-year bond on 10/24/22 to have suffered the same percentage price loss as the U.S. 30year treasury bond in part a. You can use the Goal Seek function in Excel to find this. 1 e. Based on your answer to d, calculate the credit spread to the 5-year U.S. treasury for the Brazilian 5-year bond on 10/24/22. How much has Brazil's credit spread changed from 12/3/21 to 10/24/22
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