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 8.2% coupon rate and pays the $82 coupon once per year. The third has a 10.2% coupon rate and pays the $102 coupon once per year.

5 a. If all three bonds are now priced to yield 7% to maturity, what are the prices of: (1) the zero-coupon bond; (ii) the 8.2% coupon bond; (iii) the 10.2% coupon bond? (Round your answers to 2 decimal places.) 10 Zero Coupon 8.2% Coupon 10.2% Coupon points Current prices eBook Print b. If you expect their yields to maturity to be 7% at the beginning of next year, what will be the price of each bond? (Round your answers to 2 decimal places.) here Zero Coupon References 8.2% Coupon 10.2% 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 8.2% Coupon 10.2% Coupon Pre-tax rate of return d. If your tax bracket is 30% on ordinary income and 19.8% 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 10.2% Coupon 8.2% 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 6% at the beginning of next year. (Round your answers to 2 decimal places.) Zero Coupon 8.2% Coupon 10.2% Coupon Price 1 year from now Pre-tax rate of return After-tax rate of return % % %