The following table summarizes the yields to maturity on several one-year, zero-coupon securities:

Security Yield

Treasury 3.13

AAA corporate 3.28

BBB corporate 4.24

B corporate 4.90

A. What is the price(expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating?

B. What is the credit spread on AAA-rated corporate bonds?

C. What is the credit spread on B-rated corporate bonds?

D. How does this credit spread change with the bond rating? Why?

(round to nearest 3 decimal places)