Question
The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.063.06 AAA corporate 3.133.13 BBB corporate 4.124.12 B
The following table summarizes the yields to maturity on several one-year, zero-coupon securities:
| Security | Yield (%) |
| Treasury | 3.063.06 |
| AAA corporate | 3.133.13 |
| BBB corporate | 4.124.12 |
| B corporate | 4.884.88 |
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
nothing%.
(Round to three decimal places.)
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Personal Finance Turning Money into Wealth
Authors: Arthur J. Keown
7th edition
978-0133856507, 013385650X, 133856437, 978-0133856439
