use this figure for the A-C
12- 10 - BBB Figure 6-3 Yields on 10-Year U.S. Government Treasury. AAA, and BBB Corporate Bonds, since 2000 In September 2008, the financial crisis led to a sharp increase in the rates at which firms could borrow. AAA Percent 2 Source: For AAA and BBB corpo- rate bonds, Bank of America Morri Lynch: for 10-year U.S. treasury yield, Federal Reserve Board MyEconLab Real-time data 10-year U.S. Treasury Yield Jan-00 9/11 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 saunat 10. The spread between riskless and risky bonds The text used Figure 6-3 to describe fluctuations in the spreads between riskless rate on 10-year U.S. Treasury bonds and 10-year AAA and BBB corporate bonds. This figure can be updated by going to the Federal Reserve Bank of St. Louis FRED data base. The 10-year Treasury bond yield is variable DGS10. Moody's 10-year seasoned AAA bond is series DAAA. Finally, the Bank of America BBB bond yield is series BAMLCOA4CBBBEY. a. Find the values of these three yields for the day closest to the day you are looking at this question. Which is the highest yield and which is the lowest yield? What is the spread be- tween the BBB and AAA yield? What is the spread between the BBB and AAA yield? b. Now go back one calendar year and find the same yields and calculate the spreads. You could fill in the table below: AAA- BBB- BBB AAA Treasury BBB-AAA Treasury Treasury Date Today One year Ago C. Do you see any evidence of a change in the risk premium over the past year or has it been relatively stable? Explain. 12- 10 - BBB Figure 6-3 Yields on 10-Year U.S. Government Treasury. AAA, and BBB Corporate Bonds, since 2000 In September 2008, the financial crisis led to a sharp increase in the rates at which firms could borrow. AAA Percent 2 Source: For AAA and BBB corpo- rate bonds, Bank of America Morri Lynch: for 10-year U.S. treasury yield, Federal Reserve Board MyEconLab Real-time data 10-year U.S. Treasury Yield Jan-00 9/11 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 saunat 10. The spread between riskless and risky bonds The text used Figure 6-3 to describe fluctuations in the spreads between riskless rate on 10-year U.S. Treasury bonds and 10-year AAA and BBB corporate bonds. This figure can be updated by going to the Federal Reserve Bank of St. Louis FRED data base. The 10-year Treasury bond yield is variable DGS10. Moody's 10-year seasoned AAA bond is series DAAA. Finally, the Bank of America BBB bond yield is series BAMLCOA4CBBBEY. a. Find the values of these three yields for the day closest to the day you are looking at this question. Which is the highest yield and which is the lowest yield? What is the spread be- tween the BBB and AAA yield? What is the spread between the BBB and AAA yield? b. Now go back one calendar year and find the same yields and calculate the spreads. You could fill in the table below: AAA- BBB- BBB AAA Treasury BBB-AAA Treasury Treasury Date Today One year Ago C. Do you see any evidence of a change in the risk premium over the past year or has it been relatively stable? Explain
