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Compute ytm of the bond

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Reference no: EM132801960

Suppose a corporate bond that reaches maturity on 07/01/2036 is trading today (2/15/2021) for $763. The bond certificate indicates that the stated coupon rate for this bond is 5% and that the coupon payments are to be made semiannually.

-Compute YTM of the bond. Clearly state your Excel / Calculator inputs.

-Suppose the bond's credit rating is BB. Would you use YTM as a reasonable estimate of the investment rate of return on the bond? Explain your answer.

-If your answer to b) is "no", give two alternative estimates of the investment return on the bond. Assume that the risk free-rate is 2.5% and market expected rate of return is 8%. Using recession estimate for probability of default estimate beta of the bond implied by the value of YTM you computed in b)

Reference no: EM132801960

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