Question

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Problem 6-30 A BBB-rated corporate bond has a yield to maturity of 8.2%. A U.S. Treasury security has a yield to maturity of 6.5%. These yields are quoted as APRs with semiannual compounding. Both bonds pay semiannual coupons at a rate of 7% and have five years to maturity. Note: assume a $1,000 face value. Complete the stata below using cell references to given data or previous calculations. In some cases, a simple cell reference is all you need. To copy/paste a formula across a row or down a column, an absolute cell reference or a mixed cell reference may be preferred. If a specific Excel function is to be used, the directions will specify the use of that function. Do not type in numerical data into a cell or function. Instead, make a reference to the cell in which the data is found. Make your computations only in the blue cells highlighted below. In all cases, unless otherwise directed, use the earliest appearance of the data in your formulas, usually the Given Data section. a. What is the price (expressed as a percentage of the face value) of the Treasury bond? - 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? 8.2% 6.5% BBB bond YTM Treasury YTM Coupon rate Maturity (years) Face value 7% 1,000 a. What is the price (expressed as a percentage of the face value) of the Treasury bond? Coupon Number of periods Semiannual YTM Bond price Percentage of face value 35.00 10 3.25% 1,021.06 102.11%

Answer 1

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08:13 VOX 3 ENG 13 01 2020 BR C D E F G H I J K L M N O 8.20% 6.50% BBB BOND YTM TREASURY YTM COUPON RATE MATURITY FACE VALUE 7% 1000 PRICE AS A % OF FACE VALUE COUPON NUMBER OF PERIODS SEMI ANNUAL YTM BOND PRICE % OF FACE VALUE 35 (=C6*C4/2] 10 (=C5*2] 3.25% (=C3/2] 1021.06 (=PV(C11,C10,-C9,-C6)] 102.11% (=C12/C6] PRICE AS A % OF FACE VALUE SEMI ANNUAL YTM BOND PRICE % OF FACE VALUE 4.10% (=C2/2] 951.58 [=PV(C16,C10,-C9,-C6)] 95.16% (=C17/C6] CREDIT SPREAD ON BBB BOND SPREAD 0.017 (=C2-C3] Sheet1 Sheet2 LOAN SHEET PV FV CELL REFER CELL REF Sheet3 Sheel4 SPREAD ©