a) You are a financial analyst for an international firm that deals in bonds. There are two bonds been offered: EXIM bond and ENERGY bond. EXIM is a default free bond and ENERGY is default risk bond. The firm is interested in buying one of the bonds and you are being asked to explain the impact of default free and default risk status of the bonds on the price and interest rates of the two bonds using appropriate graphs. (5 marks)

b) Explain in your own words (with the aid of a diagram) the impact of tax considerations on tile price and interest on bonds. (5 marks)

c) Explain the differences between tile risk structure and term structure of interest rates. (2 marks)

d) The theory of the term structure of interest rates explains three facts: Mention these facts. (3 marks)

NB: Consider Ghana tax system for this question.