What is the fund current yield on the bond

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Reference no: EM132793904

You are a Vice President at a real estate securities fund ("Fund") that seeks to maximize total return through both current income and capital appreciation by investing in securities issued by real estate investment trusts ("REITs"). Based upon your investment recommendation back in December 2015, the Fund took a 'par' position in a 10-year, new issue, 5.15% senior unsecured note of a hypothetical apartment REIT with a 'BBB' credit rating, whose primary holdings are in California, Texas, mid-Atlantic, and Florida. Assume 10-year Treasuries were trading at 2.28 % in December 2015. Given the current economic and real estate environment, the market is indicating a spread requirement for five year 'BBB' multifamily REIT paper of 135bps (with a fairly volatile recent trading range). You have been asked to determine the current market value of this bond for reporting to clients and senior management.

Problem 1: Based on your calculated market value, what is the Fund's current yield on the bond?

Reference no: EM132793904

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