Macquarie Group (Australian listed company: ASX MQG) offers banking, financial advisory, investment and funds management service, with around AUD550 billion of Funds under management. Due to the recent market instability surrounding the COVID19 pandemic, MQG intends to recapitalize through the issuance of $1 billion in corporate bonds into the Australian market. The bonds will have a term to maturity of 6 years and a coupon rate of 5% p.a., with coupons paid semi- annually. Required: As a financial analyst of MQG, you are asked to; a) Demonstrate graphically the current term structure for the Australian corporate bond market. Describe the observed relationship. b) Based on the term structure from part (a), discuss which of the term structure theories best describes what you observe. c) Calculate the costs (in %) to MQG of the debt issue. Show all working. d) Calculate the reduction in costs (in %) that could be achieved if the credit rating of MQG for the bond issue was improved by one level. Compare your answer with that from part (c) and explain why the costs are reduced. Show all working. e) Suppose MQG issued the bond at yields as in part (c), and that immediately after yields then changed to those in part (d). What impact would this have on the price of the bond? (Hint: use duration). How accurate is this estimate? Macquarie Group (Australian listed company: ASX MQG) offers banking, financial advisory, investment and funds management service, with around AUD550 billion of Funds under management. Due to the recent market instability surrounding the COVID19 pandemic, MQG intends to recapitalize through the issuance of $1 billion in corporate bonds into the Australian market. The bonds will have a term to maturity of 6 years and a coupon rate of 5% p.a., with coupons paid semi- annually. Required: As a financial analyst of MQG, you are asked to; a) Demonstrate graphically the current term structure for the Australian corporate bond market. Describe the observed relationship. b) Based on the term structure from part (a), discuss which of the term structure theories best describes what you observe. c) Calculate the costs (in %) to MQG of the debt issue. Show all working. d) Calculate the reduction in costs (in %) that could be achieved if the credit rating of MQG for the bond issue was improved by one level. Compare your answer with that from part (c) and explain why the costs are reduced. Show all working. e) Suppose MQG issued the bond at yields as in part (c), and that immediately after yields then changed to those in part (d). What impact would this have on the price of the bond? (Hint: use duration). How accurate is this estimate