A BBB-rated corporate bond has a yield to maturity of 7.3%. A U.S. treasury security has a yield to maturity of 5.5%. T
Posted: Mon Mar 21, 2022 4:33 pm
A BBB-rated corporate bond has a yield to maturity of
7.3%.
A U.S. treasury security has a yield to maturity of
5.5%.
These yields are quoted as
APRs
with semiannual compounding. Both bonds pay semi-annual
coupons at a rate of
5.9%
and have five years to maturity.
a. 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?
7.3%.
A U.S. treasury security has a yield to maturity of
5.5%.
These yields are quoted as
APRs
with semiannual compounding. Both bonds pay semi-annual
coupons at a rate of
5.9%
and have five years to maturity.
a. 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?