You need $50,000 for a trip to London in the next month. You have 48 convertible bonds with a 5:1 conversion ratio of Telstra Group Ltd. in your investment portfolio. This means you can exchange the bonds for the stocks of the company if you wish to, without any extra charge. You can get five stocks in exchange for one bond. 

a. The convertible bonds have 10 years left till maturity. If the face value of each bond is $1000 and coupon rate is 8.5% find the current price of one bond provided the yield to maturity is 7.8%. (5 marks).

b. Telstra recently paid a dividend of $4.5 per stock. Investors in the market expect this dividend to grow at a rate of 20% for the next two years after which the growth rate will become 14% indefinitely. If required rate of return for the stock is 17% what is current price of the stock. (10 marks).

c. You have two strategies to raise the money for your trip:

1. You can sell all the bonds at the current market price
2. You can convert all the bonds into stocks and sell those stocks at current market price

Which strategy is going to help you raise the necessary fund for the trip? Show all calculations and give your decision. (5 marks).

d. Instead of taking either of the strategies from "c", you decided to take a bank loan of $50,000. A bank agrees to pay that amount as loan at 11% annual interest which needs to be repaid within 4 years. Calculate the annual loan installments and use it to prepare a completed loan amortization table.

Bond Y was issued 3 years ago at a face value of $10,000 with 8% coupon rate and 15 years of total maturity. The market interest rate for a similar risk and maturity bond currently is 10%.

a. Calculate the current price of the bond. (5 marks)

b. Based on your answer in "a" state what type of bond (premium, discount or par) it is and how its value will change from now till maturity if the market interest rate remains constant. (5 marks)

c. Bond Y is a government bond. Assume Bond Y has no interest-rate risk and the average inflation rate for the next 12 years in the economy is expected to be 2.5%. According to the Fisher effect, what is the accurate measure of real-rate of interest for the bond?