Assume you have a oneyear investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in years. The first is a zerocoupon bond that pays $ at maturity. The second has an coupon rate and pays the $ coupon once per year. The third has a coupon rate and pays the $ coupon once per year. Assume that all bonds are compounded annually.
Required:
a If all three bonds are now priced to yield to maturity, what are their prices?
Note: Do not round intermediate calculations. Round your answers to decimal places.
tableZero, Coupon, CouponCurrent prices,,,
b If you expect their yields to maturity to be at the beginning of next year, what will their prices be then?
Note: Do not round intermediate calculations. Round your answers to decimal places.
tableZero, Coupon, CouponPrice one year from now,,,
c What is your rate of return on each bond during the oneyear holding period?
Note: Do not round intermediate calculations. Round your answers to decimal places.
tableZero, Coupon, CouponRate of return,,,
