a) Explain the risks faced by debt investors. Explain whether these risks are different for investors in the short term money market and the long term debt market

b). What price would you pay for a 21 May 2043 bond on 1 December 2021 when the bond has a face value of $12.465m, a coupon of 2.65% and is trading at a yield to maturity of 1.865%? If you sold this bond 33 days later at a yield of 1.725% how much profit would you make? What is your return over this period? What is your annualised return? Compared with long term returns from fixed income, was this a good return? Explain why?

c). How much profit would you make if you purchased a $25m face value bond on 29 February 2024 which matures on 22 July 2042 that has a coupon of 2.75% and is trading at a yield to maturity of 1.925% if it is sold 44 days later at a yield of 1.965%? What is your return over the period? What is your annualised return? Compared with long term returns from fixed income, was this a good return? Explain why?