A​ BBB-rated corporate bond has a yield to maturity of 9.6%. A U.S. Treasury security has a yield to maturity of 8.1%. These yields are quoted as APRs with semiannual compounding. Both bonds pay​ semi-annual coupons at a rate of 9.0% 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?

Entrepreneurial Finance
6th Edition
ISBN:9781337635653
Author:Leach
Publisher:Leach
Chapter7: Types And Costs Of Financial Capital
Section: Chapter Questions
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A​ BBB-rated corporate bond has a yield to maturity of 9.6%. A U.S. Treasury security has a yield to maturity of 8.1%. These yields are quoted as APRs with semiannual compounding. Both bonds pay​ semi-annual coupons at a rate of 9.0% 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?

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