Showbiz, Inc., has issued eight-year bonds with a coupon of 6.76 percent and semiannual coupon payments. The market’s required rate of return on such bonds is 7.35 percent. a)  What is the market price of these bonds? b)  If the above bond is callable after five years at an 11.1 percent premium on the face value, what is the expected return on this bond?

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A:

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