AutoSave OFF sve w Individual Assignment (posted) - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments X Times New... 14 AA Aav to AL AaBbCcDdE AaBbCcDdEe AaBbCcDc AabbCcDdEt AaBbc AabbccddEx Paste B I Normal Uvab X, X Title No Spacing ADA A, Subtitle Heading 1 Heading 2 V Dictate Styles Pane Sensitivity Question 2: The current term structure is shown here: The Term Structure of Interest Rate 7 6 S 1 0 0 1 4 5 2 3 Time to maturity (year) a) (7 marks) Calculate the current price of a government bond with a face value of $1000 and a coupon rate of 7%. It is an annual coupon bond that matures in 3 years. b) (13 marks) Calculate the current price of a bond issued by XYZ corporation if it has a face value of $1000 and a coupon rate of 7%. It matures in 3 years. Use the following table to find the default risk premium. (Assume the default risk is not a function of maturity) Bond Rating Required rate of interest ? AA B 8.5% AA 7.2% XYZ Co. 7% 3 years from now ABC Co. 8% 3 years from now NP Co. 10% 5 years from now XT Co. 3% 5 years from now BB Co. 10% 3 years from now AA 7.7% A 6.85% Page 3 of 6 1295 words English (United States) D Focus - + 103% AutoSave OFF sve w Individual Assignment (posted) - Saved to my Mac Home Insert Draw Design Layout References Mailings Review View Tell me Share Comments X Times New... 14 AA Aav to AL AaBbCcDdE AaBbCcDdEe AaBbCcDc AabbCcDdEt AaBbc AabbccddEx Paste B I Normal Uvab X, X Title No Spacing ADA A, Subtitle Heading 1 Heading 2 V Dictate Styles Pane Sensitivity Question 2: The current term structure is shown here: The Term Structure of Interest Rate 7 6 S 1 0 0 1 4 5 2 3 Time to maturity (year) a) (7 marks) Calculate the current price of a government bond with a face value of $1000 and a coupon rate of 7%. It is an annual coupon bond that matures in 3 years. b) (13 marks) Calculate the current price of a bond issued by XYZ corporation if it has a face value of $1000 and a coupon rate of 7%. It matures in 3 years. Use the following table to find the default risk premium. (Assume the default risk is not a function of maturity) Bond Rating Required rate of interest ? AA B 8.5% AA 7.2% XYZ Co. 7% 3 years from now ABC Co. 8% 3 years from now NP Co. 10% 5 years from now XT Co. 3% 5 years from now BB Co. 10% 3 years from now AA 7.7% A 6.85% Page 3 of 6 1295 words English (United States) D Focus - + 103%