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 6.0% coupon rate and pays the $60 coupon once per year. The third has a 7.0% coupon rate and pays the $70 coupon once per year. a. If all three bonds are now priced to yield 6% to maturity, what are the prices of: (1) the zero-coupon bond: (ii) the 6.0% coupon bond: (ii) the 7.0% coupon bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero Coupon 7% 6% Coupon Coupon 558.40s 1,000.00 1,073.60 Current prices IS 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 6% 7% Coupon Coupon Coupon 591.60 s 1,000.00 1,068.02 Price 1 year from now $ c. What is your before-tax holding-period return on each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. 7% Coupon Pre-tax rate of return Zero Coupon 6.00% 6% Coupon 6.00% 6.00% d. If your tax bracket is 30% on ordinary income and 23% on capital gains income, what will be the after-tax rate of return on each bond? (Round your answers to 2 decimal places.) Answer is complete but not entirely correct. Zero Coupon 6% Coupon 7% Coupon 4.62 % 4.20% 4.16% 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.) Answer is complete but not entirely correct. Zero Coupon 6% Coupon 7% Coupon 644.61 $ 1.071.08 $ 1.142.16 15.44% 13.11% 12.91 IS Price 1 year from now Pre-tax rate of return After-tax rate of return % 11.89 9 9.67 96 9.48%