Suppose a seven-year,

$1,000

bond with

a

7.7%

coupon rate and semiannual coupons is trading with a yield to maturity of

6.38%.

a. Is this bond currently trading at a discount, at par, or at a premium? Explain.

b. If the yield to maturity of the bond rises to

7.26%

(APR with semiannual compounding), what price will the bond trade for?