question archive Suppose a corporation is about to issue a 3-year bond
Suppose a corporation is about to issue a 3-year bond
Subject:FinancePrice: Bought3
Suppose a corporation is about to issue a 3-year bond. The corporation needs to estimate the required yield for the bond.
-The corporation has recently issued a 3% coupon bond. The bond has four full years to maturity. The price of the bond is 102.400 per 100 of par value.
-There are 3-year and 7-year government bonds that have yields-to-maturity of 0.75% and 2.35%, respectively.
-There usually is a different yield spread for each maturity. Suppose the term structure of the spreads for bonds of the corporate issuer's quality indicates that 3-year spreads are about 10bps lower than four-year spreads.
