An investor is interested in buying a corporate bond with a face value of $1,000, AA rating, and a 10-year maturity. The bond has an annual coupon of 3.00%, payable semiannually. What is the current price of the bond? see attached information

Essentials Of Investments
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An investor is interested in buying a corporate bond with a face value of $1,000, AA rating, and a 10-year maturity.  The bond has an annual coupon of 3.00%, payable semiannually.

What is the current price of the bond?

see attached information

 

**Treasury Yield Curve (annual percentages)**

**Yield to Maturity:**
- 2-year: 0.65%
- 5-year: 1.36%
- 10-year: 1.96%
- 20-year: 2.47%
- 30-year: 2.78%

**Implied Spreads above treasuries (financial percentages)**

**U.S. Treasury:**
- All terms: 0%

**Corporate Bonds:**

- **AAA Rating:**
  - 2-year: 0.10%
  - 5-year: 0.24%
  - 10-year: 0.42%
  - 20-year: 0.48%
  - 30-year: 0.62%

- **AA Rating:**
  - 2-year: 0.14%
  - 5-year: 0.27%
  - 10-year: 0.68%
  - 20-year: 0.53%
  - 30-year: 0.85%

- **A Rating:**
  - 2-year: 0.26%
  - 5-year: 0.63%
  - 10-year: 1.04%
  - 20-year: 1.13%
  - 30-year: 1.20%

- **BBB Rating:**
  - 2-year: 0.62%
  - 5-year: 1.45%
  - 10-year: 1.47%
  - 20-year: 2.08%
  - 30-year: 2.02%

This table presents the annual percentage rates for U.S. treasury bonds over various maturities and the implied financial spreads above these treasuries for corporate bonds of differing credit ratings. Key insights can be drawn about the relative risk and return profiles of these bonds based on their maturity and credit rating.
Transcribed Image Text:**Treasury Yield Curve (annual percentages)** **Yield to Maturity:** - 2-year: 0.65% - 5-year: 1.36% - 10-year: 1.96% - 20-year: 2.47% - 30-year: 2.78% **Implied Spreads above treasuries (financial percentages)** **U.S. Treasury:** - All terms: 0% **Corporate Bonds:** - **AAA Rating:** - 2-year: 0.10% - 5-year: 0.24% - 10-year: 0.42% - 20-year: 0.48% - 30-year: 0.62% - **AA Rating:** - 2-year: 0.14% - 5-year: 0.27% - 10-year: 0.68% - 20-year: 0.53% - 30-year: 0.85% - **A Rating:** - 2-year: 0.26% - 5-year: 0.63% - 10-year: 1.04% - 20-year: 1.13% - 30-year: 1.20% - **BBB Rating:** - 2-year: 0.62% - 5-year: 1.45% - 10-year: 1.47% - 20-year: 2.08% - 30-year: 2.02% This table presents the annual percentage rates for U.S. treasury bonds over various maturities and the implied financial spreads above these treasuries for corporate bonds of differing credit ratings. Key insights can be drawn about the relative risk and return profiles of these bonds based on their maturity and credit rating.
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