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A​ BBB-rated corporate bond has a yield to maturity of 7.6%. A U.S. treasury security has...

A​ BBB-rated corporate bond has a yield to maturity of 7.6%. A U.S. treasury security has a yield to maturity of 5.7%. These yields are quoted as APRs with semiannual compounding. Both bonds pay​ semi-annual coupons at a rate of 6.0% 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?

Solutions

Expert Solution

a)

b)

c)


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