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