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A credit spread refers to the difference in interest rate between a corporate bond and a comparable maturity government bond. Suppose interest rate on a five-year corporate bond is 6 percent and that on a five-year government bond is 5 percent. The interest on corporate bond consists of a risk-free rate of 5 percent plus a credit spread of 1 percent. Credit spread is the compensation paid to investors for the risk of default in interest and principal payments. In other words, the yield of the bond comprises two components:
i) The yield on a similar default-free or government bond issue and
ii) A premium above that for the default risk associated with the bond.
The part of the risk premium attributed to default risk is called the credit spread. If the credit spread of a non-treasury bond will increase, the market price of the bond will decline. Credit spread risk can be defined as the risk wherein an issuer's debt obligation will decline due to an increase in the credit spread.
Andrew Industries is contemplating issuing a 30-year bond with a coupon rate of 7% (annual coupon payments) and a face value of $1000. Andrew believes it can get a rating of A from
discuss the applicability of the operational cycle in vegetable growing business in uganda
operating cycle of a vegetable growing business
Q. Merits of net present value method? Merits of NPV method:- (i) Time value of funds is taken into consideration: - For the reason that this method takes into account the t
a) i = 800 units, ii = 250 units, iii = 60% b) Explanation and Definition of the MOS. Play-it has the better MOS in absolute terms, although Tread-it has the better MOS when mea
discuss the applicability
IAS 14 "risk and return approach" Advantages Highlights the profitability, risk and returns of each segment. Information is more comparable with other entities.
What is a marginal cost of capital schedule (MCC)? Is the schedule always a horizontal line? Explain. The marginal cost of capital schedule is a graphic representation of the
Assume that an investor invests $X in a 3-year zero coupon Treasury security. Three years from now, the total return received would be:
a) Stockpiles refers to the accumulated (or excess level of) supply Ford motor vehicles, i.e. too much production given the level of demand. The purpose is to prevent possible shor
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