Question
ABBB-rated corporate bond has a yield to maturity of 9.8 % 9.8%. A U.S. treasury security has a yield to maturity of 8.3 % 8.3%.
ABBB-rated corporate bond has a yield to maturity of 9.8 %
9.8%. A U.S. treasury security has a yield to maturity of 8.3 %
8.3%. These yields are quoted as APRs with semiannual compounding. Both bonds paysemi-annual coupons at a rate of 9.1 %
9.1% 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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Financial Institutions Management A Risk Management Approach
Authors: Marcia Cornett, Patricia McGraw, Anthony Saunders
8th edition
978-0078034800, 78034809, 978-0071051590
