he following table summarizes yields to maturity on several 1-year, zero-coupon securities: (Click on the following icon in order to copy its contents into a spreadsheet.) Security Yield Treasury 2.860% AAA corporate 3.287% BBB corporate 3.585% B corporate 4.224% 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 ? 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. Question content area bottom Part 1 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 ? The price, expressed as a percentage of the face value, is enter your response here%. (Round to three decimal places.)
he following table summarizes yields to maturity on several 1-year, zero-coupon securities: (Click on the following icon
in order to copy its contents into a spreadsheet.)
|
Security
|
Yield
|
|
Treasury
|
2.860%
|
|
AAA corporate
|
3.287%
|
|
BBB corporate
|
3.585%
|
|
B corporate
|
4.224%
|
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
?
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.
Question content area bottom
Part 1
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
?
The price, expressed as a percentage of the face value, is
enter your response here%.
(Round to three decimal places.)
Step by step
Solved in 6 steps
