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Part 1

Your

firm has a credit rating of A.

You

notice

that the credit spread for

five-year

maturity A debt is

81

basis points

(0.81%).

Your

firm's

five-year

has semi-annual coupons and a coupon rate of

6%.

You

see

that new

five-year

Government of Canada bonds are being issued with a

YTM

of

2%.

What should the price of

your

outstanding

five-year

bonds be? Assume a par value of

$100.