Question: Use the following information to answer the question(s) below. security term(yrs) yield(%) Treasury 20 5.5% AAA Corporate 20 7% BBB Corporate 20 8% B Corporate

Use the following information to answer the question(s) below.

security term(yrs) yield(%)
Treasury 20 5.5%
AAA Corporate 20 7%
BBB Corporate 20 8%
B Corporate 20 9.6%

a) What is the credit spread on AAA-rated corporate bonds?

b) Wyatt Oil is contemplating issuing a 20-year bond with semiannual coupons, a coupon rate of 7%, and a face value of $1000. Wyatt Oil believes it can get a BBB rating from Standard and Poor's for this bond issue. If Wyatt Oil is successful in getting a BBB rating, what is the issue price for these bonds?

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