1.

2. Assume that Social Security promises you $42,000 per year starting when you retire 45 years from today (the first $42,000 will get paid 45 years from now). If your discount rate is 4%, compounded annually, and you plan to live for 15 years after retiring (so that you will receive a total of 16 payments including the first one), what is the value today of Social Security's promise? The value today of Social Security's promise is $_____. (Round to the nearest cent.)

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.07 AAA corporate 3.13 BBB corporate 4.22 B corporate 4.84 a. 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? a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating? The price of this bond will be %. (Round to three decimal places.)