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A Eurobond has been issued by a company that pays annual coupons of 5% per annum annually in arrear and is redeemable at par in exactly 10 years' time. (i) Calculate the purchase price of the bond at issue at a rate of interest of 4% per annum effective assuming that tax is paid on the coupon payments at a rate of 20%. [2] (ii) Calculate the discounted mean term of the bond at a rate of interest of 4% per annum effective, ignoring tax. [3] (iii) (a) Explain why the discounted mean term of the gross payments from the bond is lower than the discounted mean term of the net payments. (b) State two factors other than the size of the coupon payments that would affect the discounted mean term of the bond. [3] (iv) Calculate the price of the bond three months after issue at a rate of interest of 4% per annum effective assuming tax is paid on the coupon payments at a rate of 20%. [1] [Total 91 The force of interest. o(f), is a function of time and at any time f. measured in years, is given by the formula: 0.03 for 0 20 (i) Calculate the present value of a unit sum of money due at time / = 28. [71 (ii) (a) Calculate the equivalent constant force of interest from / = 0 10 / = 28. (b) Calculate the equivalent annual effective rate of discount from * = 0 to / = 28. [3] A continuous payment stream is paid at the rate of e-(.04r " per unit time between t = 3 and / - 7. (iii) Calculate the present value of the payment stream. [Total 14]