Question: Face value for bonds is $1000 unless specified otherwise. Compounding is annual unless stated otherwise. 5. Ajax is interested in issuing 5-year bonds. Based on

Face value for bonds is $1000 unless specified otherwise. Compounding is annual unless stated otherwise.

5. Ajax is interested in issuing 5-year bonds. Based on the yield curve, 5-year Treasury bonds have a yield of 4%. Ajax has a credit rating of AA. A credit rating of AA requires an additional 1.5% to compensate for default risk. What coupon rate will the bonds have?

6. Use the information below to estimate the price of a 2-year default free security with a face value of $1000 and an annual coupon of 6%. What is the yield to maturity on the bond?

Maturity	Zero Coupon Yields
1 year	5.6%
2 years	7.5%

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