The following table summarizes the yields to maturity on several one-year, zero-coupon securities: 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 the credit spread change with the bond rating? Why? 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? The price of this bond will be %. (Round to three decimal places.) b. What is the credit spread on AAA-rated corporate bonds? The credit spread on AAA-rated corporate bonds is %. (Round to two decimal places.) c. What is the credit spread on B-rated corporate bonds? The credit spread on B-rated corporate bonds is %. (Round to two decimal places.) d. How does the credit spread change with the bond rating? Why? (Select the best choice below.) O A. The credit spread decreases as the bond rating rises because higher-rated bonds are riskier. B. The credit spread decreases as the bond rating falls because lower-rated bonds are riskier. C. The credit spread increases as the bond rating rises because higher-rated bonds are riskler. OD. The credit spread increases as the bond rating falls because lower-rated bonds are riskier, 9 20 01 22 23 14 15 26 28 31 12 13 14 The following table summarizes the yields to maturity on several one-year, zero-coupon securities: 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 the credit spread change with the bond rating? Why? 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? The price of this bond will be %. (Round to three decimal places.) b. What is the credit spread on AAA-rated corporate bonds? The credit spread on AAA-rated corporate bonds is %. (Round to two decimal places.) c. What is the credit spread on B-rated corporate bonds? The credit spread on B-rated corporate bonds is %. (Round to two decimal places.) d. How does the credit spread change with the bond rating? Why? (Select the best choice below.) O A. The credit spread decreases as the bond rating rises because higher-rated bonds are riskier. B. The credit spread decreases as the bond rating falls because lower-rated bonds are riskier. C. The credit spread increases as the bond rating rises because higher-rated bonds are riskler. OD. The credit spread increases as the bond rating falls because lower-rated bonds are riskier, 9 20 01 22 23 14 15 26 28 31 12 13 14
