a) On the Trinidad and Tobago Stock Exchange (TTSE), FCB Bond is a premium bond making semiannual payments. The bond pays a 12 percent coupon, has a YTM of 9 percent, and has 10 years to maturity. RBL Bond is also traded on the TTSE and is a discount bond making semiannual payments. This bond pays a coupon rate of 8%, has a YTM of 12 percent, and also has 10 years to maturity. What is the price of each bond today? If interest rates remain unchanged, what do you expect the price of these bonds to be one year from now? In three years? In eight years? In 10 years? (6 marks)

b) Why is the correlation of assets important to an investor in term of his or her potential risk and returns? How does diversification allow an investor to combined assets that may be risky into a portfolio rather than investing into a single asset? (2 marks)

c) Do the Net Present Value (NPV) and internal rate of return (IRR) always agree to accept-reject decisions? And to ranking decisions? Please explain. (2 marks)

d) Maximization of EPS is major goal for any firm? Please discuss. (2 marks)