Zero Coupon Assignment | Professional Writing
© 39 Ā 01 1.05 None of the above is right Question 18 5 pts Which of the following statement is false In regular time, yield curve is usually upward sloping: Before economic recessions, we sometimes observe flat or downward sloping yield curve: Yield curve can be constructed using zero-coupon bonds;
Yield curve represents YTM of coupon bonds with different maturities. 5 pts Question 19 Consider a two-year 5% coupon bond issued with a face value of $1.000. Assume that the bond payoffs are uncertain: There is a 50% chance that the bond repays its face value in full and a 50% chance that the bond will default and you will receive $300. You can assume that the coupon in the first year is certain, but the last coupon is either paid in full or it is not paid if the bond defaults. Because of this uncertainty, the discount rate is 6.1%. What is the realized return if the band defaults and you don’t reinvest the first coupon?
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