The following table summarizes the yields to maturity on several one-year, zero-coupon securities.

Name of Security:

government of canada= yield % of 3.05

AAA corporate = yield % of 3.19

BBB corporate = yield % of 4.17

B corporate= yield % of 4.82

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?