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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 8 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 7.9% coupon rate and pays the $79 coupon once per year. The third has a 9.9% coupon rate and pays the $99 coupon once per year. a. If all three bonds are now priced to yield 7.9% to maturity, what are their prices? If you expect their yields to maturity to be 7.9% at the beginning of next year, what will their prices be then? What is your rate of return on each bond during the one-year holding period
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