Question 2 Mellon Inc. issued corporate bonds with a tenure of 10 years and a coupon rate of 6%. The maturity value of each bond is $1,000 and the interest payments are made on an annual basis.

Required: a. Compute the price of each bond when the market rate and coupon rate are equal. (5 Marks

) b. Compute the price of each bond when the market rate is 4%. (5 Marks)

c. Compute the price of each bond when the market rate is 8%. (5 Marks)

d. Explain the term structure of bonds using the answers to the above questions. (10 Marks)