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Would combined effect of first two measures reduce

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Reference no: EM13907027

Suppose a country plans to restructure its sovereign debt by swapping its existing government bonds for bonds that have

(i) half the face value,

(ii) half the coupon rate, and

(iii) double the remaining time to maturity.

Assuming that the relevant opportunity cost remains the same, explain how each of these three measures would affect the present value of the countries' sovereign debt. Would the combined effect of the first two measures reduce the present value of the sovereign debt by more or by less than 50%?

Reference no: EM13907027

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