...FIN515 Homework Week # 3 Brian Jack D01609334 Managerial Finance briancjack@hotmail.com 03-23-2014 Professor: Paul Tovbin Chapter 5 29. Suppose the term structure of risk-free interest rates is as shown below: Top of Form |Term |1 year | |Treasury |3.1 | |AAA corporate |3.2 | |BBB corporate |4.2 | |B corporate |4.9 | • 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 corporate bonds? • d. How does the credit spread change with the bond rating? Why? 30. HMK Enterprises would like to raise $10 million to invest in capital expenditures. The company plans to issue five-year bonds with a face value of $1000 and a coupon rate of 6.5% (annual payments). The following table summarizes the yield to maturity for five-year (annual-pay) coupon corporate...
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