3. For the corporate bond issues reported in question 2, answer the following questions:

a. Should a triple-A-rated bond issue offer a higher or lower yield than a double-A-rated bond issue of the same maturity?

b. What is the spread between the corporation A’s issue and corporation B’s?

c. Is the spread reported in part

(b) consistent with your answer to part (a)?

d. The yield spread between these two bond issues reflects more than just credit risk. What other factors would the spread reflect?

e. Corporation B’s issue is not callable. However, corporation A’s issue is callable. How does this information help you understand the spread between these two issues?