Using the data in Table 15.1, calculate the price and yield to maturity of a 3-year bond with a coupon rate of 4% making annual coupon payments. Does its yield match that of either the 3-year zero or the 10% coupon bond considered in Example 15.1? Why is the yield spread between the 4% bond and the zero smaller than the yield spread between the 10% bond and the zero?

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Table 15.1 Financial Structure of Autoveloce SpA Assets () Debt () Current Proposed 8,000 8,000 0 4,000 Equity (market and book) () 8,000 4,000 Interest rate (%) 10 10 Market value/share () 20 20 Shares outstanding 400 200