The Wattyl Group has 18-year bonds outstanding. These bonds, which have a face value of $1000 and pay semiannual coupons, have a coupon rate of 9.735 per cent and a yield to maturity of 7.95 per cent.

a Calculate the bonds current price.

b If the bonds can be called after 5 more years at a premium of 13.5 per cent over par value, what is the investors realised yield?

c If you bought the bond today, what is your expected rate of return? Explain.