Question
A BBB-rated corporate bond has a yield to maturity of 9.5%. A U.S. Treasury security has a yield to maturity of 7.6 %. These yields
A BBB-rated corporate bond has a yield to maturity of 9.5%. A U.S. Treasury security has a yield to maturity of 7.6 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 8.5%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 ____ % (Round to three decimal places.)
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