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    Bonds-Credit Spreads

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

    Security Yield (%)
    Treasury 3.1
    AAA corporate 3.2
    BBB corporate 4.2
    B corporate 4.9

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

    Can you help me get started with this assignment?

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

    Security Yield (%)
    Treasury 3.10%
    AAA corporate 3.20%
    BBB corporate 4.20%
    B corporate 4.90%

    a. What is the price (expressed as a percentage of the face value) of a one-year, ...

    Solution Summary

    Calculates Credit Spreads for AAA-rated corporate bonds and B-rated corporate bonds.

    $2.19

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