Question

The following table summarizes the yields to maturity on several one-year, zero-coupon securities:
Security ..... Yield (%)
Treasury ...... 3.1
AAA corporate .... 3.2
BBB corporate .... 4.2
B corporate .... 4.9
a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating?
b. What is the credit spread on AAA-rated corporate bonds?
c. What is the credit spread on B-rated corporate bonds?
d. How does the credit spread change with the bond rating? Why?



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  • CreatedAugust 06, 2014
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