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ABBB-rated corporate bond has a yield to maturity of 11.7 % 11.7%. A U.S. treasury security has a yield to maturity of 10.3 % 10.3%.

ABBB-rated corporate bond has a yield to maturity of 11.7 %

11.7%. A U.S. treasury security has a yield to maturity of 10.3 %

10.3%. These yields are quoted as APRs with semiannual compounding. Both bonds paysemi-annual coupons at a rate of 11.2 %

11.2% and have five years to maturity.

a. What is the price(expressed as a percentage of the facevalue) of the treasurybond?

b. What is the price(expressed as a percentage of the facevalue) of theBBB-rated corporatebond?

c. What is the credit spread on the BBBbonds?

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