What is the interest rate risk on purchase

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Reference no: EM131856787

On October 15, 2012 the real estate company Robert hf. gave out a bond. Suppose we have bought 100 millions dollars at nominal valute of the bond at issue on par.

Interest rate: 4,3%

First interest date: 15 October 2012

Dayrule = 30/360 Date of issue: 15. October 2012

Bond maturity: 15. October 2042

You can't pay up the bond to October 2017 but in between 15. October 2017 and to 31. December 2022 you can pay up the bond. In addition, the issuer shall pay a 1.5% prepayment fee in excess of the contractual principal and interest payments.

a) What is the interest rate risk on this purchase? (Compare the yield to maturity with a another bond which is the most comparable to this is one)

Reference no: EM131856787

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