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?