Question
The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield(%) Treasury 3.11 AAA corporate 3.22 BBB corporate 4.24 B corporate
The following table summarizes the yields to maturity on several one-year, zero-coupon securities:
| Security | Yield(%) |
| Treasury | 3.11 |
| AAA corporate | 3.22 |
| BBB corporate | 4.24 |
| B corporate | 4.90 |
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 Institutions Management
Authors: Anthony Saunders
3rd Edition
007303259X, 978-0073032597
