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A BBB - rated corporate bond has a yield to maturity of 8 . 2 % . A U . S . Treasury security has
A BBBrated corporate bond has a yield to maturity of A US Treasury security
has a yield to maturity of These yields are quoted as APRs with semiannual compounding.
Both bonds pay semiannual coupons at a rate of and have five years to maturity. Assume
$ face value.
a What is the price expressed as a percentage of the face value of the Treasury bond?
b What is the price expressed as a percentage of the face value of the BBBrated
corporate bond?
c What is the credit spread on the BBB bonds? Hint: Its just the difference in YTMs
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