Hamish and Todd, the owners of P&G Air, have decided to expand their operations. They instructed their newly hired financial analyst, Chris Smith, to enlist an underwriter to help sell $$35$ million in new $10-$year bonds to finance the acquisition of some airplanes to facilitate the expansion. Chris has entered into discussions with Renata Lee, an underwriter from the firm of Raines and Warren, about which bond features P&G Air should consider and what coupon rate the issue will likely have. Although Chris is aware of the bond features, he is uncertain about the costs and benefits of some features, so he is not sure how each feature would affect the coupon rate of the bond issue.

Question $1$: You are Renata$$s assistant, and she has asked you to prepare a memo to Chris describing the effect of each of the following bond features on the coupon rate of the bond. Write in $3$ sentences maximum, how these features would affect the coupon rates?

The security of the bond$$that is$,$ whether the bond has collateral.

A call provision with specified call dates and call prices.

A conversion feature $($note that S&S Air is not a publicly traded company at this point but has plans to go public in the coming years$).$

Question $2$: P&G Air is planning to issue $10-$year bonds with an annual coupon rate of $4\mathrm{.}56\%,$ paid semi$-$annually. Current market rate for bonds with similar risk profile as P&G Air is $5\mathrm{.}25\%.$ If the bonds have a face value of $$1,000,$ what should be the bond$$s price? How many bonds will they need to sell to raise the funds for the construction