The following is certain information about three bonds. All numerical answers should be calculated to at least two decimal places. By convention, the face value of all bonds is taken as $100. For simplicity, assume coupon payments are paid once a year. Bond A issued by the Federal Government of Canada: coupon rate = 5.25%, term to maturity=5 years, current price $105.35. Bond B issued by Bank of Nova Scotia: coupon rate = 4%, term to maturity= 5 years, yield to maturity = 4.75% p.a. Bond C issued by the Royal Bank of Canada: coupon rate = 4.5%, term to maturity = 5 year, current price = $100, Rank the bond ratings of the above issuers from the safest to the riskiest. Explain your reasoning and support your explanations based on the given data.
The following is certain information about three bonds. All numerical answers should be calculated to at least two decimal places. By convention, the face value of all bonds is taken as $100. For simplicity, assume coupon payments are paid once a year. Bond A issued by the Federal Government of Canada: coupon rate = 5.25%, term to maturity=5 years, current price $105.35. Bond B issued by Bank of Nova Scotia: coupon rate = 4%, term to maturity= 5 years, yield to maturity = 4.75% p.a. Bond C issued by the Royal Bank of Canada: coupon rate = 4.5%, term to maturity = 5 year, current price = $100, Rank the bond ratings of the above issuers from the safest to the riskiest. Explain your reasoning and support your explanations based on the given data.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 9P
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