Maturity (Invoice) Price One year $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)

1. 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.

2. 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 mbond.