As an investor, you are considering an investment in the bonds of the FRAMA Company. The bonds, which pay interest semiannually, will mature in ten years, and have a coupon rate of 8% on a face value of $1,000.

a) Assume your required return is 9% for the bonds in this risk class, what is the highest price (PV) you would be willing to pay for the bond today?

b) Assume your required return is 9% for the bonds in this risk class, what is the highest price (PV) you would be willing to pay for the bond next year? Assuming the market rate stays the same

c) What is the current yield of these bonds?

d) If you bought the bond at the above calculated price and hold the bonds for one year, what total rate of return will you earn (assuming the market rate does not change)?

e) If the bonds can be called in three years with a call premium of 6% of the face value, what is the yield to call on these bonds?