Melody Ltd bonds have $1,000 face value and coupon rate of 7% pa. The annual coupons are paid on 30^th November each year. The bonds will mature in 1^st December 2023. Tom bought a Melody Ltd bond in 1^st December, 2020 for $974.23 for the bond, providing him with a yield to maturity of 8% pa.

Now, one year later, on 1^st December 2021 after receiving the 2021 coupon payment, Tom sold the bond to Zoe, providing her with a yield to maturity of 7.5% pa.

a. What price did Zoe pay for the bond? (Show answer correct to the nearer cent.)

b. Calculate Toms holding period return over the year he owned the bond? (Show answer as a percentage, correct to 2 decimal places.)

c. Explain the relationship between the YTM and Prices of Melody Ltd bonds, and compare this relationship with Song Ltd bond that have 3% annual coupon and 15 years to maturity and not selling at par.