1.An issue of bonds with par of $1,000 matures in 8 years and pays 8% p.a. interest semi-annually. The market price of the bonds is $1,205 and your required rate of return is 9%.

(a) Calculate the bonds expected rate of return.

(b) Calculate the value of the bond to you, given your required rate of return.

(c) Should you purchase the bond? (State the reason for your decision.)