a) The current price of a 5-year corporate coupon bond that has a coupon rate of 9% is $900. Estimate the bonds yield to maturity if par value of the bond is $1,000 and the bond pays semi-annual coupon payments.

(6 marks)

b) Estimate the current price of a 7-year bond that has a coupon rate of 6% and par value of $1000, if the bond yield to maturity is 8%. The bond pays annually.

(6 marks)

(c ) Estimate the price of a 10-year zero coupon bond with a par value of $1,000 if the yield to maturity is 9%. (4 marks)

(d) Companies pay rating agencies such as Moody's and S&P to rate their bonds, and the costs can be substantial. However, companies are not required to have their bonds rated in the first place; doing so is strictly voluntary. Why do you think they do it? ( 4 marks)