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

The following table summarizes the yields to maturity onseveral one-year, zero-coupon securities:SecurityYield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities:SecurityYield (%)Treasury3.08AAA corporate3.16BBB corporate4.20B corporate4.85a. 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

The following is a list of prices for zero-coupon bonds of various maturities. Calculate the yields...

The following is a list of prices for zero-coupon bonds of various maturities. Calculate the yields to maturity of each bond and the implied sequence of forward rates. Maturity (Years) Price of Bond 1 $917.43 YTM= IFR= 2 $826.51 YTM= IFR= 3 $737.96 YTM= IFR= 4 $653.06 YTM= IFR=

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a...

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a yield to maturity of 7.00%. Even though the bonds have a coupon rate of 0.00%, please assume semi–annual compounding, which is the bond market convention? If inflation increased unexpectedly, forcing the nominal required rate of return on these Treasury bonds to increase by 1.50% to 8.50%, by what dollar amount would the current market price of these bonds decrease? Enter your answer rounded to...

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a...

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a yield to maturity of 7.00%. Even though the bonds have a coupon rate of 0.00%, please assume semi–annual compounding, which is the bond market convention? If inflation increased unexpectedly, forcing the nominal required rate of return on these Treasury bonds to increase by 1.75% to 8.75%, by what dollar amount would the current market price of these bonds decrease?

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.08 AAA corporate 3.20 BBB corporate 4.22 B corporate 4.87 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...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.093.09 AAA corporate 3.153.15 BBB corporate 4.204.20 B corporate 4.864.86 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...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.12 AAA corporate 3.26 BBB corporate 4.26 B corporate 4.96 a. What is the price (expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAArating? 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?...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.063.06 AAA corporate 3.183.18 BBB corporate 4.184.18 B corporate 4.844.84 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...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.08 AAA corporate 3.15 BBB corporate 4.17 B corporate 4.91 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...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%) Treasury 3.063.06 AAA corporate 3.133.13 BBB corporate 4.124.12 B corporate 4.884.88 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...

Question

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

Solutions

Expert Solution

Related Solutions

The following table summarizes the yields to maturity onseveral one-year, zero-coupon securities:SecurityYield (%)...

The following is a list of prices for zero-coupon bonds of various maturities. Calculate the yields...

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a...

U.S. Treasury 30 year maturity, zero coupon bonds are currently selling in the marketplace with a...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...

The following table summarizes the yields to maturity on several one-year, zero-coupon securities: Security Yield (%)...