(a) Briefly explain why fixed income securities like bonds are risky.

(b) You are contemplating investing in bonds issued by ABC Corporation with a par value of $1,000, annual coupon rate of 6 percent, and maturity of 8 years. The required rate of return by investors is 4%.

(i) Compute the price of the bond if interest is to be paid annually.

(ii) Compute the price of the bond if interest is to be paid semi-annually.

(c) Explain separately why a bond may be sold at a premium or a discount.