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an investor is considering purchasing a five-year corporate bond. the yield on the bond is 6.25%, the rate of inflation is 3%, the yield on the on-the-run treasury is 4.80%, and the price of the bond is par (or $100.00). the absolute yield spread, relative yield spread, and yield ratio, respectively, are:

Respuesta :

The absolute yield spread, relative yield spread, and yield ratio, of the five-year corporate bond respectively, are: 1.45%, 30.21%, 1.30.

What is corporate bond?

  • A firm can raise funds by issuing debt in the form of corporate bonds.
  • Corporate bonds can be actively traded on the secondary market, but when an investor purchases one, they are actually making a loan to the company in exchange for a number of interest payments.
  • Corporate bonds normally have higher interest rates than U.S. government bonds because they are thought to be slightly riskier in general.
  • The term "Triple-A" bonds is used to describe the highest quality (and safest, lower yielding) bonds, whereas the term "junk" is used to describe the least creditworthy bonds.

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