Information regarding bond issues (semi-annual coupon bond) from two companies follows.

Firm A:

Price - ?

Coupon Rate - 7.5%

Maturity - in 5 years

Required rate of return - 8.24%

Current Yield - 7.78%

Firm B:

Price - ?

Coupon Rate - 7.5%

Maturity - in 3 years

Required rate of return - 3.2%

Current Yield - 6.98%

(Hint: what is face value for the bond by default)

1. Calculate the current bond price for the Firm A and Firm B

2. Are the bonds trading at a discount or a premium? Why?

3. what would happen to bonds' prices if YTM for each bond to increase?