Andrew has been considering investing in the bonds of PC Berhad. The bonds were issued 5 years ago at their RM1,000 par value and have exactly 25 years remaining until they mature. They have an 8% coupon interest rate, are convertible into 50 shares of common stock and can be called any time at RM1,080. The bond is rated Aa by Moody's. PC Berhad, a manufacturer of sporting goods, recenty acquired a small athletic-wear company that was in financial distress. As a result of the acquisition, Moody's and other rating agencies are considering a rating change for PC bonds. Recent economic data suggest that expected inflation, currently at 3% annually, is likely to increase to a 4% annual rate. Andrew remains interested in the PC bond but is concerned about inflation, a potential rating change, and maturity risk. To get feel for the potential impact of these factors on the bond value, he decided to apply the valuation techniques he learned in his finance course. TO DO If the price of the common stock into which the bond is convertible rises to RM30 per share after 5 years and the issuer calls the bonds at RM1,080, should Andrew let the bond be called away from him or should he convert it into common stock? a. b. For each of the following required returns, calculate the bonds value, assuming annual nterest. Indicate whether the bond will sell at a discount, at a premium, or at par value. Required return is 6% Required return is 8% Required return us 10% 3. c. Repeat the calculation in part (b), assuming that interest is paid semiannually and that the semiannual required returns are one-half of those shown. Compare and discuss differences between the bond values for each required return calculated here and in part (b) under the annual versus semiannual payment assumptions. d. If Andrew strongly believes that expected inflation will rise by 1% during the next few months, what is the most he should pay for the bond, assuming annual interest? Ifthe PC bonds are downrated by Moody's from Aa to A, and if such a rating change will result in an increase in the required return from 8% to 8.76%, what impact will this have on the bond value, assuming annual interest? e. f. If Andrew buys the bond today at its RM1,000 par value and holds it for exactly 3 years, at which tie the required return is 7%, how much of a gain or loss will he