5 year government bonds are trading at a semi-annual yield of 2.57%. Find the price (per...
5 year government bonds are trading at a semi-annual yield of 2.57%. Find the price (per $100 face value) of a 5 year zero coupon bond issued by a BBB corporate if the current yield spread on BBB corporates is 2.2%.
Homework Answers
Calculation of current price:
In case of zeo coupon bond, interest payment is nil.
So current price= face value* PVF@2.57% for 10 years
Current price= 100*0.7759
Current price= $77.59
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