Problem 4 (5 pts.) A treasury bond that matures in 10 years has a yield of 5 %. A 10-year BBB corpor

Problem 4 (5 pts.) A treasury bond that matures in 10 years has a yield of 5 %. A 10-year BBB corporate bond has yield of 7.5 %. Assume that the liquidity premium on corporate bond is 0.5 % What is the expected default risk premium on the corporate bond?ola Problem 5 (8 pts.) E-Z company bonds are selling for $945. These 5-year $1,000 par value bonds pay 6 percent interest annually (A) If the above bonds are purchased at the market price, what is the yield to maturity (YTM)? (4 pts.) (B) What is the current yield on these bonds? (2pts) Ohint: Current vield is defined as the ratio of interest payment to current bond price.) (C) Compute the estimated capital gain (oss) yield. (2 pts) (Note: Yicld-to-maturity (YTM) is the sum of current yield and capital gain (loss) yield.)

 

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