2. Vaillancourt Enterprises issued bonds 7 years ago, which were originally sold as 12-year bonds. They carry an interest rate of 8% p.a., paid semi-annually. Bonds of the same quality have been recently issued by other companies, and they carry an interest coupon of 6% p.a., also paid semi-annually.

a. Before doing any calculations, decide whether this bond is currently selling at par, a premium, or a discount, and briefly say why you think so.

b. Calculate the theoretical value of the Vaillancourt bond.