International Financial Management 2nd Edition by Geert Bekaert ,Robert Hodrick

Exercise 21

Consider a 10-year Brady bond issued by Brazil. The coupon payment is 6.50%, and the par value has been collateralized by a U.S. Treasury bond. The current price of the bond is $98 (per $100 in par value). Compute the (blended) yield-to-maturity for the bond. What is the stripped yield Assume that the spot rates on the dollar are the ones reported in Exhibit 14.8.