Problem 4: The bonds of a firm have the following prices, depending on the remaining maturities of the bonds: Maturity Year Bond A 1 Bond B 2 Bond C 3 Price $994.2912 $1,007.253 $1,015.856 Coupon Rate 4.5% 5% 4.8% Bond A is not a zero-coupon bond. The par value of each bond is $1,000. a/ What are the yields for each maturity? b/Draw the yield to maturity c/ Assume that the yield for zero coupon bonds for the Treasury are Maturity Year Yield 0.52% 2 0.83% 3 1.06% In the same graph draw the yield curve for the Treasury. d/What is the yield spread between the firm and the Treasury for each year? el Assume that a credit rating agency upgraded the bond. The prices of bond A changed by $6, the price of bond B changed by $5, and the price of the bond C changed by $4. What is the new yield to maturity for the firm for each year? f/ What is the new spread for each year? Question: What do you think is the level of competition, the bargain power of buyers and suppliers, the barrier of entry in firms of an industry that is already stabilized? What factors could change this status of stabilized step in the evolution of an industry