Question

A​ BBB-rated corporate bond has a yield to maturity of 9.0 %. A U.S. Treasury security has a yield to maturity of 7.0 %. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 7.9 % 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?

Answer 1

1
=PV(7%/2,5*2,-7.9%*100/2,-100)=103.74247239516

2
=PV(9%/2,5*2,-7.9%*100/2,-100)=95.6480050025894

3.
=9%-7%=2%