Bonaqua Alison Corporation Limited is planning to issue 10-year bonds with a face value of $1,000. The current market rate for similar bonds is 3.5%. Assume that coupon payments will be semi-annual. The company is trying to decide between issuing a 2.8% coupon bond or a zero coupon bond. The company needs to raise $2.5 million.

a. What will be the price of the 2.8% coupon bonds? (4 marks)

b. How many coupon bonds would have to be issued? (1 marks)

c. Is the bond selling at a premium and why? (1 marks)

d. What will be the price of the zero coupon bonds? (2 marks)

PLEASE SHOW THE WORKING OUT THANK YOU!