A) Peter Pan Flying Company issued 15-year bonds three years ago at a coupon rate of 8% per annum with a face value of $1000. The bonds make semi-annual payments. The yield to maturity on these bonds is 7.5%.

3.1 Calculate the price of a bond at Peter Pan Flying Company. Provide the relevant equation.

3.2 Would you regard this bond as a par value, discount value or premium value bond? Provide two reasons for your choice.

3.3 How many bonds of Peter Pan Flying Company can you purchase if you have $100 000 available to invest in bonds?

3.4 If the coupon payments were made annually instead of semi-annually, what will the current value of the bond be? Equation is not required.

B) If you borrowed $10 000 from a bank for five years at an interest rate of 10% per annum compounded quarterly, how much would you owe the bank when the loan matures? Show the relevant equation.