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The following table summarizes the yields to maturity on several one-year, zero coupon securities:
Security Yield
Treasury, 3.15
AAA corporate 3.23
BBB corporate 4.27
B corporate 4.94
A. What is the price(expressed as a percentage of the face value) of a one-year, zero-coupon corporate bond with a AAA rating?
B. What is the credit spread on AAA-rated corporate bonds?
C. What is the credit spread on B-rated coporate bonds?
D. How does this credit spread change with the bond rating? why?
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The Millennium Charitable Foundation, which is tax exempt firm, issued debt last year at 8 percent to help finance a new playground facility in Chicago.
Computing the present value of this investment and what is the present value of this investment
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The bank is willing to loan the funds at 8% interest with annual payments at the end of the year for the next 10 years. What is the annual payment on this loan for Cooley Landscaping?
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