Ajaya Company $($Ajaya$)$ is a large manufacturing firm in Bukit Kayu Hitam, founded $10$ years ago by the Aziz's family. The company has been in the family and majority of the staff are among the family.

The company was not able to market their product in Malaysia due failure meeting the safety product requirement by SIRIM. However, their product is well accepted in Indonesia, Bangladesh, and Cambodia. Hence their existence is not well known. Despite these situations the company has progressed well and made a substantial profit.

Ajaya is now planning for expansion. Adam the financial manager suggests for the company to raise capital through Initial Public offering $($IPO$)$ on the other hand Abdullah the operation manager is suggesting for the company to issue bond, to avoid public owning the company. Azizul, the vice president is now looking at the proposal and he must decide which plan to go with.

You are required to answer the following questions based on the above passage:

a$.$ Explain to Azizul TWO $(2)$ differences between stock and bond.

$(4$ Marks$)$

b$.$ Ajaya decides to raise capital through issuing bonds. If the future interest rate is expected to increase, explain with TWO $(2)$ points to Azizul on its effects to Ajaya bond's value.

$(6$ Marks$)$