Lend Lease Ltd is planning to issue 7-year bonds with semi-annual coupon payments. The market interest rate for such bonds is 8%. Coupon payments will be made at a rate of 9.17%. The management of Lend Lease Ltd has determined the company needs to raise $875,000 to fund the purchase of a new office and wants to use the proceeds of the bond issue for that purpose.

a)Calculate the price of these 9.17% coupon bonds.

b)State and explain whether these bonds are premium or discount bonds.

c)How many of these 9.17% coupon bonds would the company issue?

d)Calculate the price of these bonds, if they paid no coupons to investors. Assume semi-annual compounding for these zero-coupon bonds.

e)How many of the zero-coupon bonds would the company need to issue?