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What is the market yield you would expect

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Question - Suppose you observed that 1-year AAA-rated government bonds are trading with a YTM of 5.75%. The yield spread between AAA- and BB-rated corporate bonds is 170 basis points. The maturity yield differential between the 1-year and 3-year government bonds is 55 basis points.

What is the market yield you would expect on a 3-year, BB-rated corporate bond that pays a 7.5% annual coupon?

How much would you pay for this 3-year, BB-rated corporate bond?

Reference no: EM133025191

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