7. The Wattyl Group has 18-year bonds outstanding. These bonds, which have a face value of $1000 and pay semiannual coupons, have a coupon rate of 9.735 per cent and a yield to maturity of 7.95 per cent. (10 Marks).

A.Calculate the bond's current price. (3 Marks).

B. If the bonds can be called after 5 more years at a premium of 13.5 per cent over par

value, what is the investor's realised yield? (3 Marks).

C. If you bought the bond today, what is your expected rate of return? Explain. (3

Marks).

F. Explain why long-term bonds with zero coupons are riskier than short-term bonds

that pay coupon interest. (1 Marks).