Question: Refer back to Figure 4.5. a. What is the yield spread in basis points between the Citigroup bond maturing in May 2015 and the DirectTV

Refer back to Figure 4.5.
a. What is the yield spread in basis points between the Citigroup bond maturing in May 2015 and the DirectTV bond maturing in March 2015? Does this spread make sense given the different ratings assigned to these bonds? If not, what factors might explain the differences in yields that we observe?
b. What is the yield spread in basis points between the Morgan Stanley bond paying a 5.625% coupon and the Morgan Stanely bond paying a 5.500% coupon? Given that these two bonds have the same credit rating and similar coupons, would you expect them to offer nearly identical yields? Why or why not?

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a The yield spread is 1137 basis points or 1137 percentage points with the Citigroup bond priced to ... View full answer

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