The following values are the spread for corporate bond yields.

a. One-year T-bills are trading with a YTM of 6 percent. What yield would you expect to find on A-rated corporate bonds maturing in one year?
b. Five-year government bonds have a maturity yield differential of 50 basis points. What yield would you expect to observe on non-investment grade (BB-rated) corporate bonds with a five-year maturity?

Transcribed Image Text:

Bond RatingSprea d over AAA 30 basis points 45 basis points 70 basis points 110 basis points