A venture firm has decided to issue bonds to raise new capital urgently needed for its growth. As it is not well known on the market, to attract investors, the bonds have to carry high annual coupon, as high as 16%. The maturity has been set to be 10 years. Answer: 1) If the bond is issued at 121.5% of its par value today, what is its yield to maturity? What is its duration? Briefly explain the concept of duration and its application in bond valuation and investment. 2) To protect itself from falling interest rates, the company has decided to issue bonds with a call feature: the bonds can be called in 5 years at a price of 110% of par value if interest rates fall substantially. Suppose the callable bonds are issued today at the same price as in Part 1) above, what is the yield to call if the bonds are called