: The current term structure is shown here: The Term Structure of Interest Rate 7 6 Interest rate (%) 0 1 2 3 4 5 Time to maturity (year) a) What is the current price of a government bond with a face value of $1000 and a coupon rate of 5%? It is an annual coupon bond that matures in 5 years. b) What is the current price of a bond issued by XYZ corporation if it has a face value of $1000 and a coupon rate of 5%? It matures in 5 years. Use the following table to find the default risk premium. (Assume the default risk is not a function of maturity) Bond Rating Required rate of interest A ? A 6% 4% XYZ Co. 5% 5 years from now ABC Co. 8% 3 years from now NP Co. 10% 5 years from now XT Co. 3% 5 years from now BB Co. 10% 3 years from now B 9% A 7%