Question 3 (25 marks) The information below is available about a 15-year fixed coupon bond issued by Pure Air Plc and the market. Face value 100 Current market price 120 Annual coupon rate 4% Prevailing interest rate 3% a. i. Compute the semi-annual coupons for this bond. (2 marks) ii. Given the information above, is the price of the bond likely to increase or decrease in the future? Justify your answer and also calculate the new price. (5 marks) iii. Emma is one of the major bondholders of Pure Air Plc, owning 45% of the total bonds issued by the company. She is disappointed at the corporate bonds' performance over the last few years and is planning to make her voice heard during the next round of voting. Do you think she will be able to do this? How? Justify your answer. (3 marks) b. Explain the concept of time value of money. (6 marks) c. Imagine you have currently invested 100,000 in a savings account. If the interest rate is expected to be 1% next year, 2% in the year afterwards and 3% in the third year, what will your investment be worth at the end of three years? (4 marks) d. You have been offered: (i) 70,000 in six years' time from now; or (ii) 60,000 today. The current interest rate is 3%. Which option will you choose? Briefly justify your answer and show all your workings. (4 marks)