question archive The following table summarizes yields to maturity on several 1-year, zero-coupon securities: Security Yield Treasury 3
The following table summarizes yields to maturity on several 1-year, zero-coupon securities: Security Yield Treasury 3
Subject:FinancePrice: Bought3
The following table summarizes yields to maturity on several
1-year, zero-coupon securities:
Security Yield
Treasury 3.100%
AAA Corporate 3.200%
BBB Corporate 4.200%
B Corporate 4.900%
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 $1,000?
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?
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 $1,000?
The price, expressed as a percentage of the face value,
is (Round to three decimal places.)
b. What is the credit spread on AAA-rated corporate bonds???
The credit spread on AAA-rated corporate bonds is %. (Round to three decimal places.)
c. What is the credit spread on B-rated corporate bonds?
The credit spread on B-rated corporate bonds is %. (Round to three decimal places.)
d.??How does the credit spread change with the bond
rating? Why?(Select the best choice
below.)
A.The credit spread decreases as the bond rating increases,
because higher rated bonds are riskier.
B.The credit spread increases as the bond rating falls,
because lower rated bonds are riskier.
C.The credit spread increases as the bond rating increases,
because higher rated bonds are riskier.
D.The credit spread decreases as the bond rating falls,
because lower rated bonds are riskier.
