$(3$ Marks$)$

Your company wants to pay off some long$-$term debt, so you decide to buy back some conventional $10-$year bonds that you issued years ago. The face value of the bonds is $$700,$ and

the bonds were issued at a coupon rate $($interest rate$).$

Currently, other companies with the same risk profile as your company are offering new $2-$year bonds at an interest rate of $\%.$ Assume that you are at the start of year $9,$ i$.$e$.,$ the $8^{th}$

interest payment has been made. What is a fair offer to buy back the bonds?

$($For your answer use TWO decimal places. Do not write dollar sign nor commas in your answer, just the number$).$

$($Please use the interest FORMULAS for the calculations in this questions. DO NOT use the tables$).$

Answer: