What is the yield on this 5-year corporate bond

Assignment Help Finance Basics
Reference no: EM133123096

A 5-year Treasury bond has a 3.1% yield. A 10-year Treasury bond yields 6.05%, and a 10-year corporate bond yields 8.95%. The market expects that inflation will average 3.75% over the next 10 years (IP10 = 3.75%). Assume that there is no maturity risk premium (MRP = 0) and that the annual real risk-free rate, r*, will remain constant over the next 10 years. (Hint: Remember that the default risk premium and the liquidity premium are zero for Treasury securities: DRP = LP = 0.) A 5-year corporate bond has the same default risk premium and liquidity premium as the 10-year corporate bond described.

What is the yield on this 5-year corporate bond? Round your answer to two decimal places.

Reference no: EM133123096

Questions Cloud

Compute the discount rate : Compute the discount rate. (Do not round intermediate calculations. Input your answer as a percent rounded up to the nearest whole percent.)
Dcf forecast : 1. Select a publicly held company of your choice. MICROSOFT
How much interest will have been earned : Suppose he leaves the accumulated contributions for another 6 years in the RRSP at 3.4% compounded monthly. How much interest will have been earned
Discuss the procedures for the preservation of evidence : Discuss the procedures for the preservation of evidence; be sure to connect this work with the chain of custody. Describe consequences
What is the yield on this 5-year corporate bond : What is the yield on this 5-year corporate bond? Round your answer to two decimal places.
What amount be reported as appropriated retained earnings : Nancy Company issued 200,000 shares of P5 par value at P10 per share. What amount should be reported as appropriated retained earnings at year-end
What are the break-evens : On a per contract basis, what are the break-evens, best cases and worst cases, and when do the worst and best cases occur?
What is the effective annual rate : Q1. Royal International Bank (RIB) charges an interest rate of 1.25% per month on loans to its customers. Like all lenders, RIB must report an annual percentage
What effective rate of interest does his saving account have : Peter wants to save $2,600 in nine months by depositing $860 at the end of every three months into a savings account. What effective rate of interest does have

Reviews

Write a Review

Finance Basics Questions & Answers

  Why does most interbank currency trading worldwide involve

Why does most interbank currency trading worldwide involve the U.S. dollar?

  Revise the fcf model by using market

How can we revise the FCF model by using market comparables and multiples to make it hit corporate targets we might have? For example, we might want to see what assumptions might justify the market's value on a stock -- how can we use the model co..

  What is the amount of the depreciation expense

Sun Lee's Furniture just purchased some fixed assets classified as 5-year property for MACRS. The assets cost $53,000. What is the amount of the depreciation expense for the first year?

  What expenses are shown on your cash flow statement

Conversely, what expenses are shown on your cash flow statement and not in your P&L? Why are they different? What information exists on your balance sheet.

  What must the expected return on the market be

A stock has an expected return of 10.4 percent, its beta is 1.01, and the risk-free rate is 6.30 percent.

  What is the approximate sales price for dish

One of the dishes cost per portion is $3.29 and direct labor is $.91. Using actual pricing method, what is the approximate sales price for this dish?

  Etsitty arts inc a leading producer of fine cast silver

etsitty arts inc. a leading producer of fine cast silver jewelry is considering the purchase of new casting equipment

  If you start making 115 monthly contributions today and

if you start making 115 monthly contributions today and continue them for 6 years what is their present value if the

  Define the cash conversion cycle

Why is working capital management important to a company? Are there particular industries where managing working capital is more important?

  What is bad boys cost of capital

If Bad Boys, Inc. raises capital using 45% debt, 5% preferred stock, and 50% common stock, what is Bad Boys cost of capital?

  Compute the mark-to-market value

Compute the mark-to-market value of the following short forward GBP contract. The size of the contract is GBP 3,800,000 and the forward rate is F3USD/GBP

  What is the conversion ratio

he bond pays $60 per year in interest and is selling in the market for $965. It matures in 7 years. Market rates are 10% annually.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd