a) The following features of a bond may have a bearing on realized return and risk. Explain (i) Principal payment structure (1 mark) (ii) Embedded options (1 mark) (ii) Maturity (1 mark) b) A friend would like to engage you on portfolio diversification a term they are not familiar with. Explain what diversification is. Explain to him how he can diversify his portfolio of investments. (5 marks) c) Consider the following three bonds that all have par values of Sh. 100,000. I. A 10- year zero coupon bond priced at 48.20, IL. A 5-year 8% semi-annual-pay bond priced with a YTM of 8%. III. A 5-year 9% semi-annual-pay bond priced with a YTM of 8%. Required Rank the three bonds in terms of how important reinvestment income is to an investor who wishes to realize the stated YTM of the bond at purchase by holding it to maturity. (3 marks) An investor is considering buying shares of XYZ limited. He has identified three companies that are in the same industry as XYZ. Data for the companies are shown below