[Total 11 marks) 8. A bond of nominal amount 100 000 is to be issued bearing interest payable half- yearly in arrears at a rate of 3% per annum. The bond is to be redeemed at a rate of 105 per 100 nominal exactly 10 years after the date of issue. An investor is liable to income tax at 40% and capital gains tax at 30%. The investor wishes to purchase, at the date of issue, the entire amount of the issued bond. The investor wants to achieve a net effective yield of at least 2% per annum. (a) Determine whether the investor would make a capital gain if the bond is held until redemption. [3 marks] (b) Calculate the maximum price which the investor should pay. (5 marks] (Total 8 marks]