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What is the promised yield-to-maturity

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Reference no: EM133069824

Corporate Bonds:

Prices for zero-coupon corporate bonds with face values of $1,000 and one year until maturity are summarized in the following table:

Rating 

Price 

AAA 

AA 

A 

BBB 

BB 

$952.38 

$950.57 

$947.87 

$940.73 

$930.23 

  1. What is the promised yield-to-maturity on one-year zero-coupon AA-rated corporate bonds? 
  2. A one-year zero-coupon corporate bond has a yield-to-maturity of 7.7%.  Is it a junk bond? 
  3. A friend tells you that the one-year spot rate for risk-free Treasury securities is 5.3%. Do you believe him?  Why or why not?  What is the maximum sensible one-year spot rate?

Reference no: EM133069824

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