MAN AUTO Uzbekistan plans to expand its international operations. The company would like to raise funds by issuing and selling a non-callable Eurodollar bond. They plan to issue 150,000 units at par (face) value of $1,000 each and 9% fixed coupon rate over 5-year term to maturity. The bond pays coupon annually. The current market yield for an equivalent corporate bond is 7%. Additionally, the company plans to hedge its USD currency exposure. You work as an investment analyst at BlueRock Capital Partners, a European fixed-income investment manager that represents the interests of several globally oriented mutual funds. BlueRock Capital is currently reviewing bond investment opportunities in Central Asia. Your manager asks you to assess the potential investment opportunity (as presented above). BlueRocks minimum required rate of return for investing in emerging markets corporate bonds is 6%. When investing in firms that operate in the transportation industry, they require an additional risk premium of 200 basis points. Answer the following questions related to the above opportunity: Question 1 (20 marks) a) Given the above face value, maturity, coupon and yield, estimate the value (price) of the $1,000 bond in the marketplace upon issuance. Use the traditional bond valuation and assume the bond carries no embedded options. (10 marks) b) By considering the relationship between the yield and coupon, explain why the value of this bond is above or below its par value. (5 marks) c) If the bond yield remained the same, would the price of the same bond increase or decrease after 1 year? What about 2 years? Explain by considering the price-maturity relationship. (5 marks)