Question: 1) Two corporate bonds (from two different issuers) with notional $1000 and 3% and 7% coupon paid annually at year 1, 2, 3, 4

1) Two corporate bonds (from two different issuers) with notional $1000 and 3% and 7% coupon paid annually at year 1, 2, 3, 4 and 5, have 5 year remaining before they mature. The current risk free discount curve is 2% flat, annual compounding. (1) what is the present value of these bonds under the risk free discount curve? (2) The 3% bond is traded at $817.94, the 7% bond is traded at $989.82, what are their internal yield of return (YTM)? (3) Can you speculate what happened to the two companies since they issued their bonds?

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