ABBB-rated corporate bond has a yield to maturity of 12.9 % 12.9%. A U.S. Treasury security has
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Question:
ABBB-rated corporate bond has a yield to maturity of 12.9 %
12.9%. A U.S. Treasury security has a yield to maturity of 11.3 %
11.3%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 11.6 %
11.6% and have five years to maturity.
a. What is the price(expressed as a percentage of the facevalue) of the Treasurybond?
b. What is the price(expressed as a percentage of the facevalue) of theBBB-rated corporatebond?
c. What is the credit spread on the BBBbonds?
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