A firm issues a 10-year coupon bond with an annual coupon rate of 4.00% (APR) that priced at $98.33 per $100 of face value. The 10-year US Treasury bond was yielding 2.86% (APR) on the day this bond was issued.

i. Determine the annualized default spread (in basis points) of this 10 year bond over the 10-year US Treasury on the day of issuance. (Hint: default spread = Bond YTM (APR) UST YTM (APR) (recall both have 2 compounds periods per year)

ii. If market interest rates were to rise unexpectedly, identify which direction the price of this bond would move and explain the reason why.

iii. Assume the duration of this 10-year corporate bond is 8.5 years. Provide an estimate of how much the value of this bond would change if the market yield on this security were to rise by 1% (APR).

iv. In the USA markets, identify the minimum credit rating this security would need to be assigned need to considered Investment grade. (You may use either S&P or Moodys ratings system)