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Please help me part D and E. Thank you please help me part D and E. Thnak you 5 Assume you have a 1-year Investment
Please help me part D and E. Thank you
please help me part D and E. Thnak you
5 Assume you have a 1-year Investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 9.6% coupon rate and pays the $96 coupon once per year. The third has a 11.6% coupon rate and pays the $116 coupon once per year. a. If all three bonds are now priced to yield 5% to maturity, what are the prices of: (1) the zero-coupon bond; (II) the 9.6% coupon bond; (III) the 11.6% coupon bond? (Round your answers to 2 decimal places.) 5.55 points Answer is complete and correct. Zero Coupon 613.91 9.6% 11.6% Coupon Coupon 1,355.20 $ 1,509.63 Current prices S b. If you expect their yields to maturity to be 5% at the beginning of next year, what will be the price of each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero 9.6% Coupon Coupon S 644.61S 1,326.96 $ 11.6% Coupon 1,469.12 Price 1 year from now c. What is your before-tax holding-period return on each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero Coupon Pre-tax rate of return 9.6% Coupon 5.00% 11.6% Coupon 5.00% 5.00% d. If your tax bracket is 30% on ordinary income and 18.4% on capital gains income, what will be the after-tax rate of return on each bond? (Round your answers to 2 decimal places.) X Answer is not complete. 9.6% Coupon After-tax rate of return Zero Coupon 11.56 X % 11.6% Coupon % 3.29 X % e. Recalculate your answers to (b)-(d) under the assumption that you expect the yields to maturity on each bond to be 4% at the beginning of next year. (Round your answers to 2 decimal places.) Zero Coupon 9.6% Coupon 11.6% Coupon Price 1 year from now Pre-tax rate of return After-tax rate of return % % % % % % 5 Assume you have a 1-year Investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in 10 years. The first is a zero-coupon bond that pays $1,000 at maturity. The second has an 9.6% coupon rate and pays the $96 coupon once per year. The third has a 11.6% coupon rate and pays the $116 coupon once per year. a. If all three bonds are now priced to yield 5% to maturity, what are the prices of: (1) the zero-coupon bond; (II) the 9.6% coupon bond; (III) the 11.6% coupon bond? (Round your answers to 2 decimal places.) 5.55 points Answer is complete and correct. Zero Coupon 613.91 9.6% 11.6% Coupon Coupon 1,355.20 $ 1,509.63 Current prices S b. If you expect their yields to maturity to be 5% at the beginning of next year, what will be the price of each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero 9.6% Coupon Coupon S 644.61S 1,326.96 $ 11.6% Coupon 1,469.12 Price 1 year from now c. What is your before-tax holding-period return on each bond? (Round your answers to 2 decimal places.) Answer is complete and correct. Zero Coupon Pre-tax rate of return 9.6% Coupon 5.00% 11.6% Coupon 5.00% 5.00% d. If your tax bracket is 30% on ordinary income and 18.4% on capital gains income, what will be the after-tax rate of return on each bond? (Round your answers to 2 decimal places.) X Answer is not complete. 9.6% Coupon After-tax rate of return Zero Coupon 11.56 X % 11.6% Coupon % 3.29 X % e. Recalculate your answers to (b)-(d) under the assumption that you expect the yields to maturity on each bond to be 4% at the beginning of next year. (Round your answers to 2 decimal places.) Zero Coupon 9.6% Coupon 11.6% Coupon Price 1 year from now Pre-tax rate of return After-tax rate of return % % % % % %Step by Step Solution
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