Security

Yield $(\%)$

Treasury

$3\mathrm{.}12$

AAA corporate

$3\mathrm{.}26$

BBB corporate

$4\mathrm{.}18$

B corporate

$4\mathrm{.}95$

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?