Consider the following yields to maturity on various one-year zero-coupon bonds; Treasury:4.85%, AAA corporate:5.075%, BBB corporate:5.9%,...

Consider the following yields to maturity on various one-year zero-coupon bonds; Treasury:4.85%, AAA corporate:5.075%, BBB corporate:5.9%, B corporate:6.55%. The credit spread of the B corporate bond is closest to:

a. 0.225%

b. 4.85%

c. 1.05%

d. 1.7%

Expert Solution

Yield on Treasury = 4.85%

Yield on B corporate bond = 6.55%

Spread on B corporate bond = 0.0655 - 0.0485

Spread on B corporate bond = 1.70%

jeff jeffy answered 2 years ago

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Consider the following yields to maturity on various one-year zero-coupon bonds; Treasury:4.85%, AAA corporate:5.075%, BBB corporate:5.9%,...

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