a$)$ Exactly $3$ years ago, you purchased at par a $11-$year, $10$ percent semi$-$annual coupon bond,

with a face value of $$1000.$ Today, the market rate of interest is $6\%.$

i$)$ What was the interest rate $($discount rate$)$ at the time you purchased the bond?

$(1$ mark$)$

ii$)$ Suppose you wish to sell the bond today, how much can you sell if for? $(2$ marks$)$

iii$)$ What is your rate of return on the bond if all coupons were reinvested in an account,

which pays $2\%$ interest per year until the bond is sold $2$ years after owning it

assuming the market interest rate was $6\%?(2$ marks$)$

b$)$ Genome Ltd intends to issue $7-$year bonds with semi$-$annual coupon payments. The

market interest rate for such bonds is $8\%.$ Coupon payments will be made at a rate of

$9\mathrm{.}0\%.$ The management of Genome has determined that the company needs to raise

$$875,000$ to fund the purchase of a new office and will use the proceeds of the bond issue