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In: Finance

The following table summarizes yields to maturity on several 1-year, zero-coupon securities:

The following table summarizes yields to maturity on several 1-year, zero-coupon securities:

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.How does the credit spread change with the bond rating? Why?

Note:

Assume annual compounding.


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