Your firm has a credit rating of A. You notice that the credit spread for five-year maturity A debt is 85 basis points (0.85%). Your firms five-year debt has a coupon rate of 6%. You see that new five-year Treasury notes are being issued at par with a coupon rate of 2.0%.

a. What should the yield to maturity be for your firms five-year debt? Why?

b. What should the price of your outstanding five-year bonds be per $100 of face value?