Question
The following table summarizes the yields to maturity on several one-year, zero-coupon securities. Security Yield (%) Government of Canada 3.09 AAA corporate 3.15 BBB corporate
The following table summarizes the yields to maturity on several one-year, zero-coupon securities.
Security | Yield (%) |
---|---|
Government of Canada | 3.09 |
AAA corporate | 3.15 |
BBB corporate | 4.21 |
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 an 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 an AAA rating?
The price of this bond is
nothing%.
(Round to three decimal places.)
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