A corporate bond matures in 2 years, pays semi-annual coupons, has a coupon rate of 5.8% and a AA credit rating. A 2-year Treasury bond that makes payments onthe same days as the corporate bond has a yield to maturity of 2.2% (APR, semiannual compounding). The credit spread on AA bonds is 89 basis points (0.89%).What should be the price of the corporate bond? Assume a $1,000 face value.Assuming a $1,000 face value, the price of the bond is $(Round to the nearest cent.)

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Answered: A corporate bond matures in 2 years,…

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

Section: Chapter Questions

Problem 1PS

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