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?

Security Yield %

Treasury 3.08

AAA corporate 3.16

BBB corporate 4.15

B corporate 4.87