Question

A corporate bond with 10 year life gives a return of 10 % a year. There is a probability of 5 % that the corporate could default, in which case there is a probability of 60 % to receive 5 % and 40 % to receive 4 %. Calculate (i) downside semi-variance (ii) shortfall probability based on the risk free rate of return of 6 %.

Answer 1

Heya mate 

The answer of ur question is 

♢ A 10 year , 10 % coupon bond has the greatest interest rate price risk 

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