Zack's Snacks, Inc. has a credit rating of A. The credit spread for A rated bonds with five years remaining until maturity is 130 basis points (1.30 percentage points). Zack's has five-year bonds outstanding with a par value of $1,000 and an annual coupon rate of 4.25%, with coupons paid semi-annually. The yield to maturity on newly issued five-year U.S. Treasury notes is 3.10%. What should the price of the Zack's notes be?
Zack's Snacks, Inc. has a credit rating of A. The credit spread for A rated bonds with five years remaining until maturity is 130 basis points (1.30 percentage points). Zack's has five-year bonds outstanding with a par value of $1,000 and an annual coupon rate of 4.25%, with coupons paid semi-annually. The yield to maturity on newly issued five-year U.S. Treasury notes is 3.10%. What should the price of the Zack's notes be?
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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Transcribed Image Text:Zack's Snacks, Inc. has a credit rating of A. The credit spread for A rated bonds with five years remaining until maturity is 130 basis
points (1.30 percentage points). Zack's has five-year bonds outstanding with a par value of $1,000 and an annual coupon rate of
4.25%, with coupons paid semi-annually. The yield to maturity on newly issued five-year U.S. Treasury notes is 3.10%. What should
the price of the Zack's notes be?
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