The writer is very fast, professional and responded to the review request fast also. Thank you.
Pierson owns a garment factory in Spain and sells designer clothes to US and other European countries. He is trying to attract some investments from US that he can use to expand further into the US market. US investors are looking for stable cash flow, which is going to be a challenge given that the fashion industry is changing constantly and he can get stuck with unsold inventory. To allay their fears, Pierson decides to invest some of the capital raise into Italian 10 year Government Bonds. He explains that the return from these bonds will be used to improve his operations. Ignoring currency exposure, consider the following:
(a.) He decides to invest into 10 year 1,000 Euro Government bond with 8% coupon rate and semi-annual coupons. If the bond is currently trading for a price of 957.35 Euros, what is the bond’s yield to maturity? Assume he buys 10,000 of these bonds. **Please explain how to calculate this**
(b.) Suppose he is told that the yield to maturity has increased to 15% (expressed as an APR with semiannual compounding). What price is the bond trading for now? **Please explain how to calculate this**
a) Price = 957.35Face value = 1000Semiannual coupon = 8%/2 *1000 = 40Years to maturity = 10*2 =20 Semiannual Yield to maturity = [40 + (1000-957.35)/20]/ (1000+957.35)/2]= 42.1325/978.675=…
Show more
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.
Read moreEach paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.
Read moreThanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.
Read moreYour email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.
Read moreBy sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.
Read more