Question
A BBB-rated corporate bond has a yield to maturity of 7.6%. A U.S. treasury security has a yield to maturity of 5.7%. These yields are
A BBB-rated corporate bond has a yield to maturity of 7.6%. A U.S. treasury security has a yield to maturity of 5.7%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 6.0% 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?
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Investments An Introduction
Authors: Herbert B Mayo
11th Edition
1133936520, 9781133936527
