Degree of default risk and mature-coupon rate of return

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Assume you have a one-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 8.9% coupon rate and pays the $89 coupon once per year. The third has a 10.9% coupon rate and pays the $109 coupon once per year. a. If all three bonds are now priced to yield 8.9% to maturity, what are their prices? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero 8.9% Coupon 10.9% Coupon Current prices $ $ $ b-1. If you expect their yields to maturity to be 8.9% at the beginning of next year, what will their prices be then? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero 8.9% Coupon 10.9% Coupon Price one year from now $ $ $ b-2. What is your rate of return on each bond during the one-year holding period? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Zero 8.9% Coupon 10.9% Coupon Rate of return % % %

Reference no: EM131073371

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