Question
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000,
An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8%. Bond C pays a 11.5% annual coupon, while Bond Z is a zero coupon bond. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.
Bond valuation | |||||||
Bond C | Bond Z | ||||||
Length of maturity in years | 4 | 4 | |||||
Face value | $1,000 | $1,000 | |||||
Yield to maturity | 8.00% | 8.00% | |||||
Annual coupon | 11.50% | 0.00% | |||||
Formulas | |||||||
Years to Maturity | Price of Bond C | Price of Bond Z | Price of Bond C | Price of Bond Z | |||
4 | #N/A | #N/A | |||||
3 | #N/A | #N/A | |||||
2 | #N/A | #N/A | |||||
1 | #N/A | #N/A | |||||
0 | #N/A | #N/A | |||||
Assuming that the yield to maturity of each bond remains at 8% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Do not round intermediate calculations. Round your answers to the nearest cent.
Years to Maturity | Price of Bond C | Price of Bond Z |
4 | $ fill in the blank 2 | $ fill in the blank 3 |
3 | $ fill in the blank 4 | $ fill in the blank 5 |
2 | $ fill in the blank 6 | $ fill in the blank 7 |
1 | $ fill in the blank 8 | $ fill in the blank 9 |
0 | $ fill in the blank 10 | $ fill in the blank 11 |
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