In: Finance
The following table summarizes yields to maturity on several 1-year, zero-coupon securities:
Security | Yield |
Treasury | % |
AAA Corporate | % |
BBB Corporate | % |
B Corporate | % |
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. rating? Why? How does the credit spread change with the bond
Note:
Assume annual compounding.