You are a finance manager of a FORBES 5000 Indonesian based company. Now you have some idle cash that you would like to invest in government securities that at least you give you a 7% return. Coincidently, the Indonesian Government has just recently issued a new dollar- denominated bond series with a face value of $1,000. The annual coupon rate is 8% with a maturity of 12 years. Based on this information, now, you are required to calculate:

1. a) What is the maximum price you are willing to invest in that bond? Show your calculation. (10 marks)

2. b) If the bond is selling for $1,200, what is the current yield of the bond? (10 marks)