1. Suppose you bought a ten-year long-term bond one year ago. The bond pays 10,000 at the end of the year for ten years and then returns the face value at the end of the tenth year. When you bought the bond the market interest rate (yield to maturity) was 8% per year and the face value of the bond is 100,000. You have received the first coupon payment, but the market interest has also increased to 10% per year, and you are thinking of selling the bond.

1. What price do you expect to receive? (15 marks)
2. What price would you have received if the market interest rate had fallen to 6% per year? (10 marks)

2. Use the following information to answer this part of the question.

Consider three investments options A, B and C. All cash flows are in nominal terms.

Year	A	B	C
0	- 2000	-4000	-5000
1	1000	2000	3000
2	1000	1500	2000
3	1000	1000	2000

All payments are made at the end of the year. If the market interest rate is 10% per year,

Calculate the modified internal rate of return (MIRR) and the net present value (NPV) of the three options. Please show all calculations. (25 marks)

(b) Consider two investment options: X and Y. End of the year cash flows are in nominal terms for X and in real terms for Y are as follows:

Year	Nominal Cash Flow X	Real Cash Flow Y
0	-10000	-10000
1	4000	4000
2	5000	4500
3	3500	5000

All payments are made at the end of the year. If the nominal interest rate 10% per year and the real interest rate is 7% per year,

(i) Calculate the REAL net present value options of X and Y and explain which option would you pick? Please show all calculations including the annual real cash flows for option X. (25 marks)

PLEASE TYPE NO HANDWRITING. KINDLY PROVIDE THE FULL CALCULATION BASED ON THE MARKS. HIGHLY APPRECIATED