Question: 1) Two corporate bonds (from two different issuers) were issued at par (i.e., priced at notional value at their issuance) 2 years ago with notional

1) Two corporate bonds (from two different issuers) were issued at

1) Two corporate bonds (from two different issuers) were issued at par (i.e., priced at notional value at their issuance) 2 years ago with notional $1000 and 3% and 7% coupon paid annually at year 1,2,3,4,5,6 and 7 , have 5 year remaining before they mature. The current risk free discount curve is 4.5% flat, annual compounding. (1) what is the present value of these bonds under the risk free discount curve? (2) The 3% bond is traded at $791.76, the 7% bond is traded at $1062.34, what are their internal yield of return (YTM)? (3) At the time the bonds were issued the risk free rate was 2% (annual compounding), can you speculate what happened to the two companies since they issued their bonds

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