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What is the credit spread on the BBB bonds

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Reference no: EM132932254

Question - A BBB-rated corporate bond has a yield to maturity of 9.4%. A U.S. Treasury security has a yield to maturity of 7.9%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semi-annual coupons at a rate of 8.6% 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?

Reference no: EM132932254

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