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Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value
Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 9.1%. Bond C pays a 10.5% annual coupon, while Bond Z is a zero coupon bond. a. Assuming that the yield to maturity of each bond remains at 9.1% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Round your answer to the nearest cent. Years to Maturity Price of Bond C Price of Bond Z 4 $ 3 $ $ 2 $ $ 1 TA $ O $ $ b. Plot the time path of prices for each bond. A Bond Price! $1200 Bond C $10001 $800 $600 Bond Z $400 $200 $0 14 3 2 1 to Years to Maturity B Bond Price! $1200 $1000 Bond Z $800 $600 Bond C $400 $200 $0 1 6 Years to Maturity Bond Price! Bond Z $1200 $10001 $800 $600 Bond C $400 $200 $0 14 3 1 Years to Maturity D Bond Price! $1200 Bond C $10001 $800 $600 Bond Z $400 $200 $0 4 3 1 Years to Maturity
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