Question
The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.06 AAA corporate 3.13 BBB corporate 4.17 B
The following table summarizes the yields to maturity on several one-year, zero-coupon securities:
| Security | Yield (%) |
| Treasury | 3.06 |
| AAA corporate | 3.13 |
| BBB corporate | 4.17 |
| B corporate | 4.81 |
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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Financial Accounting Tools for Business Decision Making
Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
8th edition
978-1118953815, 978-1118953907
