9 10 1 Question 4 (4 Marks) 2 The JG Investment Bank is about to issue a new series of 3 10 year bonds. The bonds will have a $1000 face value and 4 will be rated AA by a respected Bond Rating Agency. 5 Currently, the yield to maturity on AA rated bonds is 6 250 basis points above the yield on similar maturity 7 government bonds. The bonds will make annual coupon payments. 8 a) If the YTM on 10 year government bonds is Enter 2.0% what coupon rate should JG choose Answer lif it wants the bonds to sell at par? 11 (1 Mark) 12 13 b) If JG issues 1,500 bonds, how much capital Enter 14 will they raise from the sale? (1 mark) Answer 15 16 C) Two years later, the YTM on 8 year gov't Enter 17 bonds has risen to 2.4%. If the yield on Answer AA rated bonds is still 250 basis points 19 higher than a gov't bond, what is the new 20 price of the bond? Enter your Final Answer Hero 21 (note: round to the nearest cent) (1 mark) 22 23 a) JG bonds now sell at a Premium 24 (1 Mark) Par Check only o 25 a Discount Box 25 nmn wigh work (if any) in the space below }