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Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bondis, His financial planmer has suggested the following bends: - Rond B has a 7% annual coupon, matures in 12 years, and has a $1,000 face value. - Bond chas an goo annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yleld to maturity of 7%. answer is zero, enter "D'. a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. BondAissellingatBondBissellingatBondCissellingatbecauseitscouponrateisbecauseitscouponrateisbecauseitscouponrateisthegoinginterestrate. b. Calculate the price of each of the three bonds. Round your answers to the nearest cent. Plice (Bond A): 5 Price (Bond B): 5 Price (Bond C): 5 Wulrent yleld (toond n : Current yield (Bond B): Current yield (Band c): d. If the yleld to matulity for each bond lemalns at y ' Price (Bond A): 5 Price (Bond B): $ Pritx: (hirnxl C): at a call price of $1,080. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. % 3. 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 f. Explain briefly the difference between price risk and reinvestment risk. Which of the following bonds has the most price risk? Which has the most reinvestment risk? - A 1-year bond with a 7\% annual coupon - A 5-year bond with a 7\% annual coupon - A 5-year bond with a zero coupon - A 10-year bond with a 7\% annual coupon - A 10-year bond with a zero coupon A has the most price risk. A has the most reinvestment risk. g. 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. Create a graph showing the time path of each bond's value. Choose the correct graph. The correct graph is 1. What is the expected current yield for each bond in each year? Round your answers to two decimal places. 2. What is the expected capital gains yield for each bond in each year? Round your answers to two decimal places. 3. What is the total return for each bond in each year? Round your answers to two decimal places. Clifford Clark is a recent retiree who is interested in investing some of his savings in corporate bondis, His financial planmer has suggested the following bends: - Rond B has a 7% annual coupon, matures in 12 years, and has a $1,000 face value. - Bond chas an goo annual coupon, matures in 12 years, and has a $1,000 face value. Each bond has a yleld to maturity of 7%. answer is zero, enter "D'. a. Before calculating the prices of the bonds, indicate whether each bond is trading at a premium, at a discount, or at par. BondAissellingatBondBissellingatBondCissellingatbecauseitscouponrateisbecauseitscouponrateisbecauseitscouponrateisthegoinginterestrate. b. Calculate the price of each of the three bonds. Round your answers to the nearest cent. Plice (Bond A): 5 Price (Bond B): 5 Price (Bond C): 5 Wulrent yleld (toond n : Current yield (Bond B): Current yield (Band c): d. If the yleld to matulity for each bond lemalns at y ' Price (Bond A): 5 Price (Bond B): $ Pritx: (hirnxl C): at a call price of $1,080. 1. What is the bond's nominal yield to maturity? Round your answer to two decimal places. % 2. What is the bond's nominal yield to call? Round your answer to two decimal places. % 3. 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 f. Explain briefly the difference between price risk and reinvestment risk. Which of the following bonds has the most price risk? Which has the most reinvestment risk? - A 1-year bond with a 7\% annual coupon - A 5-year bond with a 7\% annual coupon - A 5-year bond with a zero coupon - A 10-year bond with a 7\% annual coupon - A 10-year bond with a zero coupon A has the most price risk. A has the most reinvestment risk. g. 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. Create a graph showing the time path of each bond's value. Choose the correct graph. The correct graph is 1. What is the expected current yield for each bond in each year? Round your answers to two decimal places. 2. What is the expected capital gains yield for each bond in each year? Round your answers to two decimal places. 3. What is the total return for each bond in each year? Round your answers to two decimal places