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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 6.5 % and have five years to maturity.
a. What is the price? (expressed as a percentage of the face value) of the treasury bond? (Round to three decimal places.)
b. What is the price? (expressed as a percentage of the face value) of the BBB-rated corporate bond? (Round to three decimal places.)
c. What is the credit spread on the BBB bonds?
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