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 9.0% coupon rate and pays the $90 coupon once per year. The third has a 11.0% coupon rate and pays the $110 coupon once per year.

a. If all three bonds are now priced to yield 8% to maturity, what are the prices of: (i) the zero-coupon bond; (ii) the 9.0% coupon bond; (iii) the 11.0% coupon bond? (Round your answers to 2 decimal places.)

	Zero Coupon	9% Coupon	11% Coupon
Current prices

b. If you expect their yields to maturity to be 8% at the beginning of next year, what will be the price of each bond? (Round your answers to 2 decimal places.)

	Zero Coupon	9% Coupon	11% Coupon
Price 1 year from now

c. What is your before-tax holding-period return on each bond? (Round your answers to 2 decimal places.)

	Zero Coupon		9% Coupon		11% Coupon
Pre-tax rate of return		%		%		%

d. If your tax bracket is 30% on ordinary income and 19% on capital gains income, what will be the after-tax rate of return on each bond? (Round your answers to 2 decimal places.)

	Zero Coupon		9% Coupon		11% 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 7% at the beginning of next year. (Round your answers to 2 decimal places.)

	Zero Coupon		9% Coupon		11% Coupon
Price 1 year from now
Pre-tax rate of return		%		%		%
After-tax rate of return		%		%		%