Question
You own the following positions. Using the information provided: (for Zero Coupon Bonds m = 1, Coupon Bonds m = 2) Issuer Maturity Coupon Price
You own the following positions. Using the information provided: (for Zero Coupon Bonds m = 1, Coupon Bonds m = 2)
Issuer | Maturity | Coupon | Price (% Par) |
US Treasury Bond | 2030 | 0% | 75.75 |
XYZ Bond | 2030 | 5.00% | |
JKL Corp | 2030 | 7.50% | 89.1 |
If you bought the JKL bond today and sold it five years from today, when the YTM on 3yr. US Treasury = 3.0%, the YTM on a 5 yr US Treasury = 4.0% andthe YTM on an 8 yr. US Treasury = 5.0%; the risk premium for JKL is 6.0% when you sell the bond; what is the realized return on your investment in JKL? Please show how to set this up on excel
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