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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
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 an 7.4% coupon rate and pays the $74 coupon once per year. The third has a 9.4% coupon rate and pays the $94 coupon once per year. a. If all three bonds are now priced to yield 7.4% to maturity, what are their prices? (Do not round intermediate calculations, Round your answers to 2 decimal places.) Zero 7.4% Coupon 9.4% Coupon Current prices $ $ b-1. If you expect their yields to maturity to be 74% 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 7.4% Coupon 9.4% Coupon Price one year from $ $ now b-2. 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 7.4% Coupon % 9.4% Coupon % Rate of return Next
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