• In January 2006, the yield on AAA-rated corporate bonds averaged approximately 5 percent; one year later, the yield on these same bonds had climbed to about 6 percent because the Federal Reserve increased interest rates during the year. Assume that IBM issued a 10-year, 5 percent coupon bond on January 1, 2006. On the same date, Microsoft issued a 20-year, 5 percent coupon bond. Both bonds pay interest annually. Also assume that the market rate on similar-risk bonds was 5 percent at the time that the bonds were issued.