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 6%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond. a. Assuming that the yield to maturity of each bond remains at 9 6% over the next 4 years, calculate the price of the bonds at each of the following years to maturity:

Years to Maturity Bond C Price Bond Z Price

4 _____________ _____________

3 _____________ _____________

2 _____________ _____________

1 _____________ _____________

0 _____________ _____________

b. Plot the time path of prices for each bond.

- 7-6 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 9.6% Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond a. Assuming that the yield to maturity of each bond remains at 9.6% over the next 4 years, calculate the price of the bonds at each of the following years to maturity: Years to Maturity Price of Bond C Price of Bond Z b. Plot the time path of prices for each bond