Assume that a 10-year, 2.5% annual coupon bond with semiannual (two periods per year) payments has a par value of $1,000. Assume the bond can be called at the five-year mark (i.e., in 5 years) at a call price of $1,100. The bond currently sells for $950. Employ the Excel file to answer the following questions:

A) Assume the current annual market rate is 5% and the periodic market rate is half of the market rate. Use the Excel PV function to calculate the present value of the callable bond. Note for the PV function, a negative sign should be placed on both the payment and future value.