Question
The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.07 AAA corporate 3.22 BBB corporate 4.19 B
The following table summarizes the yields to maturity on several one-year, zero-coupon securities:
| Security | Yield (%) |
| Treasury | 3.07 |
| AAA corporate | 3.22 |
| BBB corporate | 4.19 |
| B corporate | 4.85 |
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?
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Foundations of Financial Management
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen
15th edition
77861612, 1259194078, 978-0077861612, 978-1259194078
