The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury

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 an 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?

Maturity
Maturity is the date on which the life of a transaction or financial instrument ends, after which it must either be renewed, or it will cease to exist. The term is commonly used for deposits, foreign exchange spot, and forward transactions, interest...