Coupon bond with current maturity

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Reference no: EM132466645

Assume a cost of funds of 4% throughout the assignment.

Use the transition matrix and yields in the slides (example with 3 ratings A,B,C and 3 yields). Always use the 99% VaR to compute RAROC and assume $100 face value

Consider an A-rated, 5%-coupon bond with current maturity of 3 years, and recovery rate of 0.5.

What follows is a numeric fill in the blank question with 1 blanks.

What is the RAROC of the bond using the 99% VaR? Please write your answer in percentages (e.g., for 13.3%, write 13.3).

Accepted characters: Only numbers, decimal point markers (i.e., periods), or sign indicators preceding a number (e.g., -5) are allowed, except where scientific notation is needed. Values in scientific notation format should use "e" to represent "times 10 to the power of" (e.g., 3e-3 means 3 x 10-3).

Complex numbers should be in the form (a + bi) where "a" and "b" need to have explicitly stated values. For example: 1+1i is valid whereas 1+i is not. 0+9i is valid whereas 9i is not.

Reference no: EM132466645

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