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How do u get the spot yield rates for each yrs?
1yr -3.85% how?
Why do u then discount it along with the coupon rate?
The spot yield rates are those from the govt bond yield curve, plus the yield spreads (given the credit rating is falling to A).
So for year 1 it is 3.2% + 0.65% = 3.85%.
Market values are always the interest amounts discounted at the relevant yield.
You must not post scans of your book – it is breach of copyright for us to have them showing on this website.
Sir…
1. logically, if i invest in a 3 yr bond for 3 years, in this case my YTM will be [3-yr spot + spread], therefore, under the A rating, the ytm will be 4.2+0.87=5.07 and that is how i calculated the new mkt value. pls comment on my logic irrespective of the old examiner.
2. if i understand you correctly (and i have read the article u r referring to), the examiner wants the mkt values to be computed using the spots + spreads for each year? correct?
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