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The following table summarizes yields to maturity on several 1-year, zero-coupon securities: Security Treasury AAA Corporate BBB Corporate B Corporate Yield 2.940% 3.226% 3.491% 4.056%
The following table summarizes yields to maturity on several 1-year, zero-coupon securities: Security Treasury AAA Corporate BBB Corporate B Corporate Yield 2.940% 3.226% 3.491% 4.056% 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 $1,000? 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? Note: Assume annual compounding
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