Question 2 a. Explain the relationship between price of a bond and its yield to maturity (YTM), and why is it so? [5 marks] b. Explain why some bonds sell at a premium over par value while other bonds sell at a discount. What do you know about the relationship between the coupon rate and the YTM for premium bonds? What about for discount bonds? For bonds selling at par value? [3 marks] c. Tildat Plc has 7.4 per cent coupon bonds on the market that have 11 years left to maturity. The bonds make semi-annual payments. The par value of the bond is 1000. If the YTM on these bonds is 5.4 per cent, what is the current bond price? [6 marks) d. Peevee has 7.6 per cent coupon bonds making annual payments with a YTM of 6.5 per cent. The current yield on these bonds is 6.8 per cent. How many years do these bonds have left until they mature? [9 marks) e. You purchase a bond with a coupon rate of 5.94 per cent and a clean price of 11,070, face value is 10,000. If the next semi-annual coupon payment is due in 1 month, what is the invoice price? (5 marks) [Total 30 marks] [Total word count - 900]