fm3_problems28 - UN-new chapter 17 AFace value F100Data...

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Unformatted text preview: UN-new chapter 17, AFace value, F100Data table: expected return as function of Recovery % and PricePrice, P100Annual coupon rate, Q15%Recovery percentage65%37.19%40%50%60%70%80%90%100%65%8037.19%37.19%37.19%37.19%37.19%37.19%37.19%Price of bond -->8537.19%37.19%37.19%37.19%37.19%37.19%37.19%Expected cash flow109.75#MACRO?9037.19%37.19%37.19%37.19%37.19%37.19%37.19%Expected return37.19%#MACRO?10037.19%37.19%37.19%37.19%37.19%37.19%37.19%10537.19%37.19%37.19%37.19%37.19%37.19%37.19%EXPECTED RETURN ON A ONE-YEAR BONDWITH AN ADJUSTMENT FOR DEFAULT PROBABILITYNon-default probability, πRecovery percentage, λABCDEFGHIJKLM12345678910UN - new chapter 17, DPage 2CALCULATING THE EXPECTED BOND RETURNBond price100.00%Payoff(t<N)Payoff(N)Coupon rate, Q9.3637%9.36%109.36%50%9.36%109.36%Bond term, N10 9.36%109.36%Initial ratingC50.00%50.00%0.00%0.00%ABCDETransition matrixA1.00000.00000.00000.00000.0000B0.06000.90000.03000.01000.0000C0.02000.05000.88000.05000.0000D0.00000.00000.00000.00001.0000E0.00000.00000.00000.00001.0000Initial vector1Year12345678Expected payoffs-1.0000#######MACRO?#MACRO?### #MACRO?######Expected yield#MACRO?####MACRO?A ten-year "B" bond will have to have a coupon rate of 7.6273% in order to have an expected return of 7%....
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This note was uploaded on 01/23/2011 for the course FGB 780 taught by Professor Edwardchang during the Spring '09 term at Missouri State University-Springfield.

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fm3_problems28 - UN-new chapter 17 AFace value F100Data...

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