$50m 3year bond
Coupon rate 4% p.a.
Redeemable at 3 year
Annual spot yield curve for govt bond year 1= 3.54%, year 2= 4.01%, year 3=4.70%, year 4=5.60%
Table of spread
Credit rating A
Year 1= 26, year 2= 39, year 3=40, year 4=60
(Kaplan question 40)
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Calculate the market value of bond
8y ago#1Presumably there is an answer in your Kaplan book, and so i don't know why you are setting me the question - you should ask about whatever it is in the answer that you are not clear about.
The market value is, as always, the present value of the future receipts (the interest and the redemption amount), discounted at the required returns. The required returns will be those given for govt bonds as adjusted by the credit spreads so as to give the returns required on the specific bond.
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