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Rating 20 AAA AA 30 65 Credit Spread in Basis Points Time to Maturity 1...

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Rating 20 AAA AA 30 65 Credit Spread in Basis Points Time to Maturity 1 3 5 10 90 100 110 135 90 125 175 250 225 350 450 320 420 500 620 500 700 850 1050 200 BBB BB 140 170 250 300 520 680 1300 B CCC Central Perk Co. just issued 20-yr coupon bonds rated at BBB. The bonds sold at their $100 par value. 20-yr treasury notes have a YTM of 5%. a) What is the coupon rate on Central Perk's bonds? b) After 10 years Central Perk's bonds have been upgraded to AA. Assuming credit spreads remain unchanged and that 10-yr treasury notes have a YTM of 4%, what is the new price of Central Perk's bonds? c) What is the realized return to an investor who bought Central Perk's bond at issue and held it for 10 years

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