Credit Risk Homework (for Investments II class)

#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 your work please!