Interest Rate Risk (2)

John needs $1,000,000 to retire in five years. There is an annual zero-coupon bond with a par-value $1,000 that matures in 8 years, and has a YTM of 11%.

- If John buys the bond and the YTM stays at 11% then what is the price of the bond in 5 years?

- How many bonds does John need to buy so he can retire in 5 years with his $1,000,000 goal?

- If John buys the bond and the YTM stays at 11% when he sells the bond in 5 years, how much money will John have for retirement? - If John buys the bond and the YTM moves to 9% at what price will he sell the bond for in 5 years?

- If John buys the bond and the YTM moves to 9% when he sells the bond in 5 years, how much money will John have for retirement?

- If John buys the bond and the YTM moves to 13% at what price will he sell the bond for in 5 years?

- If John buys the bond and the YTM moves to 13% when he sells the bond in 5 years, how much money will John have for retirement?

- What is the current price of the 8 year zero-coupon bonds if the 11%?

- How much does John need to invest today if the bonds YTM is 11% and he wants to reach his five year goal of $1,000,000?