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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 7.7% coupon rate and pays the $77 coupon once per year. The third has a 9.7% coupon rate and pays the $97 coupon once per year.

a.

If all three bonds are now priced to yield 7.7% to maturity, what are their prices? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Zero 7.7% Coupon 9.7% Coupon
Current prices $ $ $

b-1.

If you expect their yields to maturity to be 7.7% 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 7.7% Coupon 9.7% 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 7.7% Coupon 9.7% Coupon
Rate of return % % %

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