Suppose you purchase a 10-year callable bond issued by ABC Corp. with annual coupons of $20. Its redemption amount is $100 at the ends of years 2-4, is $80 at the ends of years 5-7, is $60 at the ends of years 8-10. The market annual effective interest rate is i = 5%. In the following, t represents the time immediately after the t-th coupon is paid. (a) Calculate the highest price at time t = 0 guaranteeing a yield rate no less than 5%. (b) Calculate the highest price at time t = 6 guaranteeing a yield rate no less than 5%. Suppose the bond is called at the end of 8 years (i.e., t = 8). At t = 8, to replicate the cash inflows that you would have received at the end of years 9 and 10 (had the bond not been called earlier), you can purchase zero-coupon bonds (ZCBs). Two ZCBs available in the market are (#1) 1-year ZCB and (#2) 10-year ZCB. Suppose you can purchase each ZCB for any face value that you would like and sell them at any time at a price calculated by the yield rate i = 5%. Design two strategies by using (i) both ZCBs (ii) ZCB #2 only. Suppose you purchase a 10-year callable bond issued by ABC Corp. with annual coupons of $20. Its redemption amount is $100 at the ends of years 2-4, is $80 at the ends of years 5-7, is $60 at the ends of years 8-10. The market annual effective interest rate is i = 5%. In the following, t represents the time immediately after the t-th coupon is paid. (a) Calculate the highest price at time t = 0 guaranteeing a yield rate no less than 5%. (b) Calculate the highest price at time t = 6 guaranteeing a yield rate no less than 5%. Suppose the bond is called at the end of 8 years (i.e., t = 8). At t = 8, to replicate the cash inflows that you would have received at the end of years 9 and 10 (had the bond not been called earlier), you can purchase zero-coupon bonds (ZCBs). Two ZCBs available in the market are (#1) 1-year ZCB and (#2) 10-year ZCB. Suppose you can purchase each ZCB for any face value that you would like and sell them at any time at a price calculated by the yield rate i = 5%. Design two strategies by using (i) both ZCBs (ii) ZCB #2 only