On May 1, 2004, Global Bonds Ltd. contemplated buying bonds of Elford Equipment Ltd. These bonds have been in circulation for four years. The following information was available:

Date of issuance: May 1, 2000

Face value: CAD 450,000

Term: 20 years

Coupon rate: 8.0%, compounded semi-annually

Interest payments: October 31^st and April 30^th

After adjusting the current spot rates on the yield curve for default risk, Global Bonds estimated the market rates for these bonds to be between 7.0% and 8.0%.

REQUIRED:

1. Calculate an appropriate market value range for Elford Equipment Ltd.s bonds based on the interest rate forecast.

2. What action should Global Bonds Ltd. take if these bonds are currently trading at 98.000? Explain why?