a=6

b=6

Q5. (5pt) You are considering investing in a BBB-rated corporate bond with a 10-year maturity and a 5% coupon rate (with annual coupons). The face value of a bond is $1,000. Assuming that the bond rating is appropriate given the default risk of the company, that the risk free rate is (a+b)/2 percent, and the default spread for BBB rated corporate bonds is 2.5%. Calculate the price of the bond. (where, a=the # of alphabets of your First name and b=the # of alphabets of your Last name.) (For example, Minwoo Song=> a=6 and b=4 and hence risk free rate is (6+4)/2 = 5%) BONUS QUESTION Solve the following optimization program using the Lagrangian method.(find x* that maximize the utility, you don't need to get y*). max U(x,y) = ln(x) + y1/2 s. t. 4x + y = 10