The following table summarizes yields to maturity on several 1-year, zero-coupon securities:

Security	Yield
Treasury Bill	3.073.07%
AAA Corporate	3.793.79%
BBB Corporate	4.234.23%
B Corporate	5.215.21%

a. What is the price (expressed as a percentage of the face value) of a 1-year, zero-coupon corporate bond with a AAA-rating and a face value of

$ 1 comma 000$1,000?

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 1-year, zero-coupon corporate bond with a AAA-rating and a face value of

$ 1 comma 000$1,000?

The price is

$nothing.

(Round to the nearest cent.)

b. What is the credit spread on AAA-rated corporate bonds?

The credit spread on AAA-rated corporate bonds is

nothing%.

(Round to two decimal places.)

c. What is the credit spread on B-rated corporate bonds?

The credit spread on B-rated corporate bonds is

nothing%.

(Round to two decimal places.)

d.How does the credit spread change with the bond rating? Why?(Select the best choice below.)

A.

The credit spread decreases as the bond rating increases, because higher rated bonds are riskier.

B.

The credit spread increases as the bond rating increases, because higher rated bonds are riskier.

C.

The credit spread decreases as the bond rating falls, because lower rated bonds are riskier.

D.

The credit spread increases as the bond rating falls, because lower rated bonds are riskier.

Click to select your answer(s).