Here is the list of government zero-coupon bond (invoice) prices with different maturities:

Maturity	(Invoice) Price
One Years	$993.0217
Two Years	$978.8188
Three Years	$967.0194
Four Years	$948.7170
Five Years	$931.1732
Six Years	$911.2364
Seven Years	$901.0145

1. 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 5 years.

2. Calculate the current bond price issued by Suncor Energy if it has a face value of $1000 and a coupon rate of 7%. It matures in 5 years. Use the following table to find the default risk premium. (Assume the default risk is not a function of maturity) Hint: A common practice to find a corporate bond price is to use bond ratings issued by rating agencies. - Use the average default risk premium of bonds with a similar rating as a benchmark for the default risk premium of the corporate bond of your interest. - Add the benchmark risk premium to the risk-free rate and use it as the yield to maturity of the corporate bond. **Please note that the risk-free rate depends on the payment structure of the corporate bond.

Bond	Rating	required rate of interest
Suncor Energy 7% 5 years from now	BBB+	?
Imperial Oil 8% 3 years from now	AA-	1.93%
Woodbridge 10% 5 years from now	AAA	1.90%
Potash Corp 3% 5 years from now	BBB+	3.20%
Husky Energy 10%3 years from now	BBB+	2.85%

For part 2, you should calculate the risk-free rate. When we say risk-free rate, you can think of a risk-free bond with a similar payment structure. As for the default risk premiums, you need to calculate them for bonds you like to include in your calculation.

*The required rate of interest on a bond is YTM, so it is equal to the summation of the risk-free rate and default risk premium.

**The corporate bond in part (b) is an annual bond.