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The following table summarizes the yields to maturity on several one-year, zero-coupon securities. Security Yield (%) Government of Canada=3.06 AAA corporate= 3.12 BBB corporate= 4.17
The following table summarizes the yields to maturity on several one-year, zero-coupon securities. Security Yield (%)
Government of Canada=3.06
AAA corporate= 3.12
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 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?
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