A BBB -rated corporate bond has a yield to maturity of 10.4 %. AU.S. Treasury security has a yield to maturity of 86 % These vields are

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A BBB-rated corporate bond has a
yield to maturity of 10.4 % . AU.S.
Treasury security has a yield to
maturity of 8.6 % . These yields are
quoted as APRs with semi-annual
compounding. Both bonds pay semi-
annual coupons at a rate of 8.7 % and
have five years to maturity.
. 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?
a
Transcribed Image Text:A BBB-rated corporate bond has a yield to maturity of 10.4 % . AU.S. Treasury security has a yield to maturity of 8.6 % . These yields are quoted as APRs with semi-annual compounding. Both bonds pay semi- annual coupons at a rate of 8.7 % and have five years to maturity. . 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? a
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