Question One Blackaby plc issued a bond of with a par value of 100 in September 2005 redeemable in September 2011 at par. The coupon is 8% payable annually in September. The available facts are that the bond might have a par value of 100 but this may not be what the investors may pay for. Use the above information to answer questions a & b below. a). What is the price investors will pay for this bond at the time of issue if the market rate of interest of the security in this risk class is 7%? b). What is the bond's value in the secondary market in September 2008 if interest rate rises by 200 basis points such that this risk class is 9% between 2005 and 2008? ii) a). Bluebird plc issued a bond many years ago which is due for redemption at par of 100 in 3 years. The coupon is 6 and the market price is 91. Determine the rate of return offered in the market by this bond using linear interpolation