Assume we have a bond that has a face value of $1000 and a coupon rate of 5%, paid annually.

a) If the bond price today is 91.45% and the duration (years to maturity) is 3, what must be investors' required rate of return?

b) Assume the bond was a callable bond. Would an investor expect a higher or lower price on the bond? Justify your answer.

c) Assume the bond was a convertible bond. Would an investor expect a higher or lower price on the bond? Justify your answer.

d) Given the required rate of return from part a), would investors prefer the original bond above, or a bond that has a maturity of 5 years, a price of $900, and a coupon payment of $40, paid annually?