A BBB-rated corporate bond has a yield to maturity of 7.0%. A U.S. Treasury security...
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A BBB-rated corporate bond has a yield to maturity of 7.0%. A U.S. Treasury security has a yield to maturity of 5.2%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 5.5% and have five years to maturity.
a. What is the price (expressed as a percentage of the face value) of the Treasury bond?
The price of the Treasury bond as a percentage of face value is
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?
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