Sam purchased a 30-year, zero-coupon bond with a yield to maturity (YTM) of 4%. After holding it for 5 years, he sold it. (Note:Assume annual compounding.)

a. Assume the bond's YTM is 4% when he sells it, what is the IRR of his investment?

b. Assume the bond's YTM is 5% when he sells it, what is the IRR of his investment?

c. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain.

a. In the first year, how much principal will she pay down? How much interest will be owed in that year?

Principal

$nothing. (Round to the nearest dollar.)

Interest $nothing. (Round to the nearest dollar.)

b. In the 20th year (i.e., between years 19 and 20), how much how much principal will she pay

down?

How much interest?Principal$nothing.(Round to the nearest dollar.)

Interest $nothing. (Round to the nearest dollar.)