Consider 2 bonds. One is a 5-year bond with an 8% coupon, paid semiannually. The other is a zero coupon, 20 year bond.

a). What must be the required rate of return for the 5 year bond for it to sell at par value?

b). If the required rate of return for the 5 year bond is 6%, does the bond sell at a premium or a discount?

c). What is the price of the zero coupon bond if the required rate of return is 7%?

d). What must be the required rate of return of the investor willing to pay $650 for the zero coupon bond?