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Credit Risk Homework - #1 Using the following structure of interest rates: T=1 to T=2 T=1 to T=3 T=1 to T=4 T=1 to T=5 AAA

Credit Risk Homework - #1 Using the following structure of interest rates:

T=1 to T=2 T=1 to T=3 T=1 to T=4 T=1 to T=5
AAA 3.60 4.17 4.73 5.12
AA 3.65 4.22 4.78 5.17
A 3.72 4.32 4.93 5.32
BBB 4.10 4.67 5.25 5.63
BB 5.55 6.02 6.78 7.27
B 6.05 7.02 8.03 8.52
CCC 15.05 15.02 14.03 13.52

Price a 5-year bond with a 100 par value and annual 6% coupon if it obtains a B credit rating at the end of year 1. Please state the price in time 1 (i.e., future value) terms. Show ALL work.

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