Explore BrainMass

Explore BrainMass

    Bond Prices: BBB-rated corporate bonds and Treasury Bonds

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Can you help me get started with this assignment?

    A BBB-rated corporate bond has a yield to maturity of 8.2%. A US Treasury security has a yield to maturity of 6.5%. These yields are quoted as APR's with semiannual compounding. Both bonds pay semiannual coupons at a rate of 7% and have five years to maturity.
    a. What is the price (expressed as a percentage of the face value) of the Treasury bond?
    b. What is the price (expressed as a percentage of the face value) of the BBB-rated corporate bond?
    c. What is the credit spread on the BBB bonds?

    © BrainMass Inc. brainmass.com June 3, 2020, 10:26 pm ad1c9bdddf
    https://brainmass.com/business/bond-valuation/bond-prices-bbb-rated-corporate-bonds-and-treasury-bonds-230867

    Solution Preview

    Please see ** ATTACHED ** file(s) for complete solution and details!!

    Bond Prices
    A BBB-rated corporate bond has a yield to maturity of 8.2%. A US Treasury security has a yield to maturity of 6.5%. These yields are quoted as APR's with semiannual compounding. Both bonds pay semiannual coupons at a rate of 7% and have five ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the price (expressed as a percentage of the face value) of the Treasury bond.

    $2.19

    ADVERTISEMENT