BPP revision kit Q.20 Toltuck

Hi. For the sample answer in part (a), please may I put my own interpretation and see whether I am correct: "The workings for r's are for the Yields to Maturity (YTM). These are the initial rates of return. The subsequent workings of the spreads are due to the different credit ratings (AAA rating & BBB rating). Then, after obtaining the discount factor using the 2 different ratings, the discounted cash flows are calculated. These discounted cash flows are the payments for the bond (by the investor of the bond). Finally, in the perspective of the bond holder/investor, they pay such amount (interest payments and principal repayment), hoping to earn the total rate of return from the bond, which then leads to the IRR (which is called the YTM if the bond is held to maturity) in 3 years time." Am I correct, or am I wrong in any of these? Thank you. :)