A BBB-rated corporate bond has a yield to maturity of
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A BBB-rated corporate bond has a yield to maturity of

A BBB-rated corporate bond has a yield to maturity of 9%. A U.S. Treasury security has a yield to maturity of 7.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at an annual rate of 8.4% 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?

Hint
Accounts & FinanceTreasury bonds are government securities that are provided with a 30-year term. Treasury bonds pay a fixed interest rate on a semiannual basis. Treasury bonds price is attained by multiplying the coupon rate by the par value in order to determine the annual interest....

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