a) You are interested in buying a new fixed rate annual coupon bond issued by a BBB-rated company. The bond offers a coupon rate of 6%, has a maturity of exactly five years and a face value of $100. If the price of the bond is $95, what is its z-spread given the yield curve above? (Hint: You will need a numerical optimizer such as Excel Solver.)

Question 4 (17 marks) The following is a list of (annualized) yields to maturity for risk-free zero-coupon bonds. Maturity (Years) 2 3 4 5 Zero Coupon Spot Rates 3.0% 3.5% 4.0% 5.0% 5.5%