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: A 10-year (zero-coupon) Treasury bill with face value of $100 per share is selling at...

: A 10-year (zero-coupon) Treasury bill with face value of $100 per share is selling at $67.56 per share. There is a 10-year corporate bond with a 5% coupon rate and face value of $100 per share. The coupon payment is every 6 months. The price of the bond is $92.56 per share. Please calculate the YTM (per 6 months) and credit spread (per 6 months) for the corporate bond.

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Answer #1

For Treasury Bill,

67.56 = 100/(1 + r)10

r = 4.00%

For Corporate Bond,

I = [FV = 100, PV = 92.56, PMT = 2.50, T = 20]

I = 6.00%

Credit Spread = 0.06 - 0.04

Credit Spread = 2.00%

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