A hedge fund is holding a three-year, $10 million face value 6 percent annual coupon bond...
A hedge fund is holding a three-year, $10 million face value 6 percent annual coupon bond selling at par.
- In addition to interest rate risks what is one other risk associated with this type of bond and why?
Homework Answers
Another risk associated with this type of bond is the default risk. It is the risk that the issuer may be unable to make coupon payments and the principal repayment on time. There will be a lot of uncertainty in the three-year holding period.
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