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

Security

Yield (%)

Treasury

3.1

AAA corporate

3.2

BBB corporate

4.2

B corporate

4.9

  • 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 rating? Why?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M9791208

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