Q2 A. (20 Marks) a) What are the essential features of Bonds? What happens to par value under the following situations, and which is known a premium Bond and a discount Bond? (10 Marks) i. If YTM equals to Coupon rate ii. If YTM is greater than Coupon rate ij. If YTM is lower than Coupon rate I b) A Bond's credit rating provides a guide to its risk. Long term bonds rated as "Aa currently offers yield to maturity of 8.5 %. A rated Bonds sells at yield of 8.8 %. If a 10 year bond with a coupon rate of 8% is downgraded by Moody's (Rating Agency) from "Aa to A rating, what is likely effect of the bond price? (10 marks) Provide calculation and reasons