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Your firm has a credit rating of AA. You notice that the credit spread for 10-year maturity debt is 90 basis points (0.90%).

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Answer #1

We can find the price of bond using bond price formula:

Bond Price = coupon * (1 - (1+yield rate)^-n)/yield rate + face value/(1 + yield rate)^n

Lets take face value of bond is $100

n is year to maturity = 10 years

yield rate = 4.5% + spread

= 4.5% + .9%

= 5.4%

Coupon = 5% of $100

= $5

Bond price = 5 * (1 - 1.054^-10)/.054 + 100/(1.054)^10

= $96.97

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Answer #2

Fuck off bull shit! why cannot see the solution?



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