T-Mobile Wi-Fi 10:50 PM Credit Problems Credit Problems i If the 5-year treasury is 4.5% and a 5-year corporate bond yields 5.5%, what is the credit spread, expressed in basis points? 2, A 10-year 6% coupon corporate bond pays interest semi-annually. If the price of the bond is 99.5, what is the credit spread if the 10-year 5% treasury bond has a price of 101? 3.3 years later, the above bond is sold when 7-year treasuries are yielding 4% and 7-year credit spread is 50 bps. What is the price of the bond and the total annual return over the 3 years? 4. Put these bonds in order of increasing credit risk: AA bond, BBB bond, A bond, BB bond, US treasury bond. s. Why do you require a higher yield for a corporate bond than for a comparable maturity government bond? 6 Would you prefer to own an unsecured bond or an asset-backed bond? Why? Which is riskier for the stock? Why? same company, the bond or the s What would be the approximate yield of a bond that has a real rate of 3%, an inflation premium of 2% and a credit spread of 150 basis points? Why might you buy a B corporate bond instead of a AA corporate bond? o. Is a New York state bond more or less risky than a US treasury bond? Which has the higher yield? Does this contradict the idea that you must get paid for incremental risk