Question
You have to price the first US-dollar Global bond for Robotron, a successful producer of automated AI machines. Standard & Poor's rated Robotron, BBB+. This
You have to price the first US-dollar Global bond for Robotron, a successful producer of automated AI machines. Standard & Poor's rated Robotron, BBB+. This will be a 10-year bond benchmark with deal size amounting to US$5 billion. Being a first-time issuer, Robotron, will pay a new issue concession of 25bps. The syndicate desk knows that the YTM on the US Treasury 10 year is 1.00%; and the spreads on investment grade A- corporate bonds trade at 75 bps and for BBB the bonds trade at 175bps over Treasuries. Based on this information, at what YTM should the investment bank price the Robotron deal?
| a. | 2.25% | |
| b. | 1.75% | |
| c. | We can't price the bond on the basis of the information provided | |
| d. | 2.50% |
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