Adam is an investor who intends to use $100,000 to purchase Bond-A (which is a 15-year Zero Coupon Bond with a par value of 1000) when the market yield is 8.24%. He intends to hold the bond for 10 years and to sell that out when the market yield on the Zero Coupon Bonds is 9.25%. (Note: compounding is on an annual basis)

Alternatively, he can invest in a portfolio comprised of the following four bonds, each of which has a par value of $1,000 and pays interest semiannually.

Bond	Coupon Rate (%)	Number of Years to Maturity	Price
W	7	5	$884.20
X	8	7	$948.90
Y	9	4	$967.70
Z	0	10	$456.39

Answer the below questions.

(1) (10 marks) Calculate the price level at which Adam buys and sells Bond-A

(2) (5 marks) Calculate the annualized holding period yield or total return for the period he has held Bond-A

(3) (10 marks) Calculate the total amount he gets back from Bond-A investment

(4) (25 marks) Use the table below to show the cash flows for the four bonds and the portfolio, and calculate the total return for Bond W if the reinvestment rate is 5%.

Period	Cash flow for Bond W	Cash flow for Bond X	Cash flow for Bond Y	Cash flow for Bond Z	Cash Flow for Portfolio
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20