You have just purchased a newly issued $1,000 five year ABC Company bond at par. The fixed coupon rate is 8% paid semi-annually (the next receivable coupon is exactly six months from today).

You are considering buying another ABC company bond (another issue with possibly different features and terms). This second bond has been outstanding for some time now and it trades in the secondary market. The second bond has 5.5 years remaining to maturity, has a fixed coupon rate of 6% paid annually (next receivable coupon in six months), and has a par value of $1000.

a. What is the yield to maturity on the five year bond?

b. Employ the rate you calculated in (a) (in an appropriate manner) to value the 5.5 year bond