Answer all parts (a) to (c) inclusive (a) Assume you have a one-year investment horizon and you are trying to choose between three bonds. All have the same default risk and mature in 5 years. The first bond is a zero coupon bond that pays 1,000 at maturity. The second has an 5% coupon and paid annually. The third bond has a 6% coupon paid annually. If all three bonds are now priced to yield 5% to maturity, what are their price? (15 marks) (b) You are provided with the following information for three different convertible bonds each with par value of 1,000. Which of these bonds A, B, and C are currently "in the money" or likely to convert to equity? What factors influence will influence whether bonds A, B and C will convert before maturity? Company A Company BCompany C 2017 Rated CCC 4% 1,000 5 % s 2022 Rated CCC 25 % 400 6/2 s 2020 Rated CCC+ 2% 1,500 Yield to maturit Current bond Conversion ratio Current share 20 45 70 3 (20 marks) (c) It is not clear that issuing convertible bonds deliver value for existing shareholders. Discuss with reference to the relevant academic literature. (15 marks)