A fixed-interest security has just been issued. The security pays half-yearly coupons of 7% per annum in arrears and is redeemable at par 10 years after issue.

(a) Calculate the price to provide an investor with a net redemption yield of 5% per annum effective. The investor pays tax at a rate of 30% on income and is not subject to capital gains tax.

(b) Determine the annual effective gross redemption yield on this security assuming the price calculated in (a) is paid.