Assume you have a one-year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 9 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has a 7.1% coupon rate and pays the $71 coupon once per year. The third has a 9.1% coupon rate and pays the $91 coupon once per year. Assume that all bonds are compounded annually.

a. If all three bonds are now priced to yield 7.1% to maturity, what are their prices? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero 7.1% Coupon 9.1% Coupon

Current price~

b. If you expect their yields to maturity to be 7.1% at the beginning of next year, what will their prices be then? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero 7.1% Coupon 9.1% Coupon

Price one year from now

c. What is your rate of return on each bond during the one-year holding period? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero 7.1% Coupon 9.1% Coupon

Rate of Return