A $1,000 face value,semi-annual coupon bond,with a coupon rate of 6.00% per annum has a maturity of five years.

This bond currently yields 7.00% per annum,compounded semi-annually.

At the end of two years,this bond sells for $1,030.00.

a)What price would you pay for the bond now?

b)What is the holding period yield?

c)What is the default risk for a bond?Explain carefully why this risk arises for a bond.

Part 2

In relation to the share market,explain what is meant by market liquidity. Examine twofactors thanks t facilitate the liquidity of the share market.

In your answer,identify two factors,explain what these mean and examine how the factors enhance or deter liquidity in the share market.