Go to the Federal Reserve Board’s website at www.federalreserve.gov and get the

Question

Go to the Federal Reserve Board’s website at www.federalreserve.gov and get the latest rates on 10-year T-bills and Aaa- and Baa-rated corporate bonds using the following steps. Go to the Federal Reserve’s website at www.federalreserve.gov. Click on “Economic Research and Data,” then click on “Selected Interest Rates-H.15.” Click on the most recent date. This will bring the file onto your computer that contains the relevant data. Click on “Historical Data” and then “10-Year” under “Treasury Constant Maturities,” or “Aaa” and “Baa” under “Corporate Bonds” to get past data.

1) Calculate the current spread of Aaa- and Baa-rated bonds over the 10-year Treasury-bond rate.

2) How have these spreads changed over the last two years?

Explanation / Answer

ans a) 10 year treasury bond rate as on 21st Sept 2018 = 3.07%

10 year AAA corporate bond yield as on 21st Sept 2018 = 3.99%

Spread = 92 basis point (3.99% - 3.07%)

10 year Baa corporate bond yield as on 21st Sept 2018 = 4.9%

spread = 1.83% (4.9% - 3.07%)

ans b) 10 year treasury bond rate as on 21st Sept 2016 = 1.66%

10 year AAA corporate bond yield as on 21st Spet 2016 = 3.5%

Spread = 1.84%

10 year Baa corporate bond yield as on 21st Sept 2016 = 4.39%

Spread = 2.73%

Spread decreases to 92 basis point for Aaa corporate bond and 90 basis point Baa corporate bond of 10 year of maturity.

Related Questions

Navigate

• Browse (All)
• Browse G
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.