Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. in 2017, you purchased a 5-year 100 bp semi-annual

In 2017, you purchased a 5-year 100 bp semi-annual coupon bond from AvalonBay Communities Inc...

90.2K

Verified Solution

Question

Accounting

In 2017, you purchased a 5-year 100 bp semi-annual coupon bond from AvalonBay Communities Inc at 101.4463 (YTM = 35.742 bp). At that time, you also purchased CDS on the bond whose premium was 70 bp (APR) of the bonds principal (quarterly settlement, annuity due). Calculate the market value of default risk on AvalonBays bond when you purchased the CDS. It is the amount of money the market is willing to pay to remove any default risk. (Assume that there is no default in your calculation. Use the YTM as your discount rate.)

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Accounting
1.2K views

Porter Corporation owns all 30,000 shares of the common stock of Street, Inc. Porter has 65,000...

Chemistry
1.2K views

Ammonium Nitrate+Potassium sulfide a.Write the balance equation b.Total ionic equation c .Net equation

Psychology
1.2K views

Lucy Barnes, a 30-year-old woman who is 25 weeks pregnant, comes to the emergency department of...

Psychology
1.2K views

Answer the following questions pertaining to the movie \"Office Space\". What type of communication network do we...

Basic Math
1.2K views

Convert the Cartesian coordinate (6,-2) to polar coordinates, 0 ? ?< 2?r=Enter exact value.?=(in radian,...

Basic Math
1.2K views

Which of the following is the result when you divide3(cos 60 + i sin 60)...

Accounting
1.2K views

Northwest Building Products (NBP) manufactures two lumber products from a joint milling process: residential building...

Accounting
1.2K views

11.10 Why is an understanding of cost behaviour (e.g. fixed costs, variable costs, etc.) important?...

Accounting
1.2K views

On January 1, 2021, Red Lake Corporation issued stock options for its common shares to...

Accounting
1.2K views

4. How would the following model look if you used a composition relationship? Which is...

Accounting
1.2K views

The accounting records of Wall's China Shop reflected the following balances as of January 1,...

Accounting
1.2K views

using the data please fill out chart for each year please show steps!! ...