Question

1. Mexican sovereign US$-denominated zero coupon bonds with a 12-month maturity have a yield to maturity of 0.86% per year. The spread vs. similar bonds issued by the US government is 0.19%. Mexico has a sovereign rating of BBB+. The data imply that the US government pays:

A. .86% per year

B. .19% per year

C. .67% per year

D. -.67% per year

E. -.86% per year

F. -.19% per year

2. Mexican sovereign US$-denominated zero coupon bonds with a 12-month maturity have a yield to maturity of 0.86% per year. The spread vs. similar bonds issued by the US government is 0.19%. Mexico has a sovereign rating of BBB+. The bonds issued by the Mexican government should trade at a price of:

A. $98.65

B. $99.15

C. $98.95

D. $99.33

3. Mexican sovereign US$-denominated zero coupon bonds with a 12-month maturity have a yield to maturity of 0.86% per year. The spread vs. similar bonds issued by the US government is 0.19%. Mexico has a sovereign rating of BBB+. 4. Assuming a recovery rate of 50%, the probability that the Mexican government will default is:

A. 0%

B. 0.5%

C. 0.38%

D. -0.38%

E. -0.5%

F. 1.7%

Answer 1