Use the information for the question(s)below.

-The above table shows the yields to maturity on a number of one-year,zero-coupon securities.What is the credit spread on a one-year,zero-coupon corporate bond with a B rating?
A)0.7%
B)1.7%
C)1.8%
D)6.9%
E)0.6%

Question

Use the information for the question(s)below.
 
-The above table shows the yields to maturity on a number of one-year,zero-coupon securities.What is the credit spread on a one-year,zero-coupon corporate bond with a B rating?
A)0.7% 
B)1.7% 
C)1.8% 
D)6.9% 
E)0.6%

Quizplus · Accepted Answer

The credit spread is calculated as the difference between the yield of a corporate bond and the yield of a government bond of the same maturity. Assuming the yield on a one-year government bond is given and is lower than the yield on the B-rated corporate bond, the difference between these yields represents the credit spread. Without the specific yields provided in the question, the correct answer is based on typical financial principles where the spread compensates for the additional risk of the corporate bond over the risk-free government bond.

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