Question
A BBB-rated corporate bond has a yield to maturity of 11.8 %. A U.S. treasury security has a yield to maturity of 10.0 %. These
A BBB-rated corporate bond has a yield to maturity of 11.8 %. A U.S. treasury security has a yield to maturity of 10.0 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 10.1 % and have five years to maturity. 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 BBB-rated corporate bond? c. What is the credit spread on the BBB bonds? a. What is the price (expressed as a percentage of the face value) of the treasury bond? The price of the treasury bond as a percentage of face value is nothing%. (Round to three decimal places.) b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond? The price of the BBB-rated corporate bond as a percentage of face value is nothing%. (Round to three decimal places.) c. What is the credit spread on the BBB bonds? The credit spread on the BBB bonds is nothing%. (Round to two decimal places.)
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