fm3_problems28

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

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

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, Recovery percentage, ABCDEFGHIJKLM12345678910UN - 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%....
View Full Document

Page1 / 11

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

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online