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Company ABC plans to issue a 15-year coupon bond. The coupon rate is 3% paid semi-annually and the par value is $1000. To determine the

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Company ABC plans to issue a 15-year coupon bond. The coupon rate is 3% paid semi-annually and the par value is $1000. To determine the bond price, the company refers to the existing bonds in the market. There are two comparable companies in ABC's industry, company XYZ and company G. Company XYZ issued a 20-year zero coupon bond with a par value of $1000 five years ago. The current price of the bond is $500. The bond issued by company G has six months to maturity. Its coupon rate is 5% paid semi-annually and its current price is exactly the same as its par value $1000. 1) What is the yield to maturity (YTM) of the zero coupon bond issued by company XYZ? (3 points) 2) What is the YTM of the coupon bond issued by company G? (2 points) 3) Now we assume company ABC uses 4.8% as the YTM of its bond after considering the comparable corporate bonds in the market. What should be the price of ABC's bond? According to this bond price, what is the bond's current yield and capital gain yield? (5 points)

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