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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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