$4($a$)$ what is liquidity risk? Illustrate diagrammatically how this is factored,in the determination of interest rates on bonds issued by small and large

corporations

$($b$)$Illustrate the determination of prices and yields for bonds listed and bonds not listed on the secondary bond market. Which ones are less liquid and what

is the implication to the interest charged$\mathrm{.}3($a$)$Assume an asset XYZ that expires in one month and has strike price of Rs $105.$ The option price is Rs $2$ and the current price is Rs $105.$ Compare and $4($a$)$ what is liquidity risk? Illustrate diagrammatically how this is factored,in the determination of interest rates on bonds issued by small and large

corporations

$($b$)$Illustrate the determination of prices and yields for bonds listed and bonds not listed on the secondary bond market. Which ones are less liquid and what

is the implication to the interest charged.

contrast the risk$-$reward profile of a long call position with the help of a table and graphs.

$($b$)$ Consider two coupon bonds with face value of Rs $1000,$ coupon rate of $10\%.,$ maturing in one year and following probabilities of default,respectively.

$($i$)10\%$

$($ii$)20\%$

Assuming market interest rate of $8\%,$ calculate yield to maturity in case the two coupon bonds are default free. Also calculate the default risk premium on

each of these.