19. Use the table of bond spreads to answer the following questions. The 10-yr Treasury yield is 1.70%. Bond Spreads over 10-yr Treasury Rating Spread AAA 0.63% AA 0.78 A+ 0.98 A 1.08 A- 1.22 BBB 1.56 BB+ 2 BB 2.4 B+ 3.51 B 4.21 B- 5.15 CCC 8.2 CCC 8.64 CCC 11.34 D 15.12 a. What is the difference in basis points (bp) between the spreads of AA and BB bonds? 162 bp b. What is the difference in bp between the (estimated) YTMs of AA and BB bonds? 162 bp c. What would we expect that an AA-rated firm would pay in interest annually on $1,000,000 in principal? $24,800 d. What would we expect that a BB-rated firm would pay in interest annually on $1,000,000 in principal? $41,000 e. How much higher is a BB-rated firm's interest cost compared to an AA-rated firm's interest cost? 65.32% f. What is the difference in the estimated YTMs of the best investment grade bonds and the worst investment grade bonds? 0.93% (2.33% vs 3.26%) g. What is the (arithmetic) average YTM of investment grade firms? 2.74% h. What is the (arithmetic) average YTM of high-yield (speculative grade) firms? 8.43% i. On $100,000,000 of principal what is the annual interest cost for high yield firms and for investment grade firms? $8,430,000; $2,740,000