Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bonds. His financial planner has suggested the following bonds:

Bond A has an $11\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Bond B has a $7\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Bond C has a $15\%$ annual coupon, matures in $12$ years, and has a $$1,000$ face value.

Each bond has a yield to maturity of $11\%.$

The data has been collected in the Microsoft Excel file below. Download the spreadsheet and perform the required analysis to answer the questions below. Do not round intermediate calculations. Use a minus sign to enter negative values, if any. If an answer is zero, enter $"0".$

Download spreadsheet Bond Valuation$-$b$4$d$7$ab$.$xlsx

Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par.

Bond A is selling at because its coupon rate is the going interest rate.

Bond B is selling at because its coupon rate is the going interest rate.

Bond C is selling at because its coupon rate is the going interest rate.

Calculate the price of each of the three bonds. Round your answers to the nearest cent.

Price $($Bond A$)$: $ fill in the blank $8$

Price $($Bond B$)$: $ fill in the blank $9$

Price $($Bond C$)$: $ fill in the blank $10$

Calculate the current yield for each of the three bonds. $($Hint: The expected current yield is calculated as the annual interest divided by the price of the bond.$)$ Round your answers to two decimal places.

Current yield $($Bond A$)$: fill in the blank $11\%$

Current yield $($Bond B$)$: fill in the blank $12\%$

Current yield $($Bond C$)$: fill in the blank $13\%$

If the yield to maturity for each bond remains at $11\%,$ what will be the price of each bond $1$ year from now? Round your answers to the nearest cent.

Price $($Bond A$)$: $ fill in the blank $14$

Price $($Bond B$)$: $ fill in the blank $15$

Price $($Bond C$)$: $ fill in the blank $16$

What is the expected capital gains yield for each bond? What is the expected total return for each bond? Round your answers to two decimal places.

Bond A Bond B Bond C

Expected capital gains yield fill in the blank $17\%$ fill in the blank $18\%$ fill in the blank $19\%$

Expected total return fill in the blank $20\%$ fill in the blank $21\%$ fill in the blank $22\%$

Mr$.$ Clark is considering another bond, Bond D$.$ It has an $8\%$ semiannual coupon and a $$1,000$ face value $($i$.$e$.,$ it pays a $$40$ coupon every $6$ months$).$ Bond D is scheduled to mature in $9$ years and has a price of $$1,150.$ It is also callable in $5$ years at a call price of $$1,040.$

What is the bond's nominal yield to maturity? Round your answer to two decimal places.

fill in the blank $23\%$

What is the bond's nominal yield to call? Round your answer to two decimal places.

fill in the blank $24\%$

If Mr$.$ Clark were to purchase this bond, would he be more likely to receive the yield to maturity or yield to call? Explain your answer.

Because the YTM is the YTC$,$ Mr$.$ Clark expect the bond to be called. Consequently, he would earn $.$

Explain briefly the difference between price risk and reinvestment risk.

This risk of a decline in bond values due to an increase in interest rates is called $.$ The risk of an income decline due to a drop in interest rates is called $.$

Which of the following bonds has the most price risk? Which has the most reinvestment risk?

A $1-$year bond with an $11\%$ annual coupon

A $5-$year bond with an $11\%$ annual coupon

A $5-$year bond with a zero coupon

A $10-$year bond with an $11\%$ annual coupon

A $10-$year bond with a zero coupon

A has the most price risk.

A has the most reinvestment risk.

Calculate the price of each bond $($A$,$ B$,$ and C$)$ at the end of each year until maturity, assuming interest rates remain constant. Round your answers to the nearest cent.

Years Remaining

Until Maturity Bond A Bond B Bond C

$12$ $ fill in the blank $32$ $ fill in the blank $33$ $ fill in the blank $34$

$11$ $ fill in the blank $35$ $ fill in the blank $36$ $ fill in the blank $37$

$10$ $ fill in the blank $38$ $ fill in the blank $39$ $ fill in the blank $40$

$9$ $ fill in the blank $41$ $ fill in the blank $42$ $ fill in the blank $43$

$8$ $ fill in the blank $44$ $ fill in the blank $45$ $ fill in the blank $46$

$7$ $ fill in the blank $47$ $ fill in the blank $48$ $ fill in the blank $49$

$6$ $ fill in the blank $50$ $ fill in the blank $51$ $ fill in the blank $52$

$5$ $ fill in the blank $53$ $ fill in the blank $54$ $ fill in the blank $55$

$4$ $ fill in the blank $56$ $ fill in the blank $57$ $ fill in the blank $58$

$3$ $ fill in the blank $59$ $ fill in the blank $60$ $ fill in the blank $61$

$2$ $ fill in the blank $62$ $ fill in the blank $63$ $ fill in the blank $64$

$1$ $ fill in the blank $65$ $ fill in the blank $66$ $ fill in the blank $67$

$0$ $ fill in the blank $68$ $ fill in the blank $69$ $ fill in the blank $70$g$.$ Calculate the price of each bond $,$ and $C)$ at the end of each year until matur