5 Problem 14-10 5.55 points Assume you have a 1-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 9.4% coupon rate and pays the $94 coupon once per year. The third has a 11.4% coupon rate and pays the $114 coupon once per year. a. If all three bonds are now priced to yield 6% to maturity, what are the prices of: (i) the zero-coupon bond; (ii) the 9.4% coupon bond; (iii) the 11.4% coupon bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero 9.4% 11.4% Coupon Coupon Coupon 558.39 $ 1,250.24 $ 1,397.44 Current prices $ b. If you expect their yields to maturity to be 6% at the beginning of next year, what will be the price of each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero 9.4% 11.4% Coupon Coupon Coupon $ 591.90$ 1,231.26 $ 1,367.29 Price 1 year from now 5 c. What is your before-tax holding-period return on each bond? (Round your answers to 2 decimal places.) 5.55 points 11.4% Coupon Zero Coupon % 9.4% Coupon % Pre-tax rate of return d. If your tax bracket is 30% on ordinary income and 18.6% on capital gains income, what will be the after-tax rate of return on each bond? (Round your answers to 2 decimal places.) 9.4% Coupon 11.4% Coupon Zero Coupon % After-tax rate of return % e. Recalculate your answers to (b)-(d) under the assumption that you expect the yields to maturity on each bond to be 5% at the beginning of next year. (Round your answers to 2 decimal places.) Zero Coupon 9.4% Coupon 11.4% Coupon Price 1 year from now Pre-tax rate of return After-tax rate of return % % % % % %