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Papa Jims Pizza issued 11-year bonds one year ago with a coupon rate of 6%. The yield-to-maturity (YTM) on these bonds is 5%. a) What

Papa Jim’s Pizza issued 11-year bonds one year ago with a coupon rate of 6%. The yield-to-maturity (YTM) on these bonds is 5%.

a) What is the current bond price?

b) Why would you expect a current 10-year Treasury bond to yield less than 5%? What additional risks are you likely being compensated for by the higher YTM on Papa Jim’s Pizza bonds?

c) What is this compensation for additional risk called?

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