20 marks) IMHO Inc. issues a 26 year bond with a 2.250% coupon and a $35,000,000.00 face value. The yield rate on the bond is 9.250% compounded annually. They will set up a sinking fund with semi-annual deposits and an interest rate r⁽¹⁾ = 3.250%.

a) What is the price of the bond initially?

b) Fill out the first 3 rows of the bond amortization table.

c) IMHO defaults on the bond on the first coupon date when the sinking fund is at least 70% of the face value of the bond. (But they still make the last coupon payment and sinking fund deposit!) Find the time of default t, the book value of the bond (OB(t)), the value of the sinking fund, and the amount the bondholders lose (after getting the balance in the sinking fund).