1. M&E Investments Co is considering investing into a 7% K1,000 corporate redeemable at a 5% premium in 6 years time. The market interest rates are expected to fluctuate over six (6) as follows: Year 1 2 3 4 5 6 Market Interest rate (%) 6 5 6 7 8 8

Required: a) Determine the market price of the bond. b) Determine the number of bonds that M&E can buy based on the price in (a) above if the business currently has K500,000 to invest. c) Explain whether the above bond is a premium bond or discount bond (clearly outline your reasoning). d) Calculate the bond duration and interpret the results. [20marks]