A BBB-rated corporate bond has a yield to maturity of

8.3%.

A U.S. Treasury security has a yield to maturity of

6.3%.

These yields are quoted as

APRs

with semi-annual compounding. Both bonds pay semi-annual coupons at a rate of

7.1%

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?

Question content area bottom

Part 1

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

enter your response here%.

(Round to three decimal places.)

Part 2

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

enter your response here%.

(Round to three decimal places.)

Part 3

c. What is the credit spread on the BBB bonds?

The credit spread on the BBB bonds is

enter your response here%.

(Round to two decimal places.)