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An investor has two bonds in its portfolio. Each bond matures in five years, has a face value of $1,000 and has a yield of

An investor has two bonds in its portfolio. Each bond matures in five years, has a face value of $1,000 and has a yield of maturity equal to 10.6%. One bond, Bond Q pays an annual coupon of 11%. The other bond, Bond M, is a zero-coupon bond. If the yield to maturity of each bond remains at 10.6% over the next five years, what will be the price of each of the bonds in each of the next five years. (10)

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