What is the credit spread on b-rated coporate bonds

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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?

 

Reference no: EM13267851

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