What is rate of return on bond

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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% coupon rate and pays $80 coupon once per year The third has 10% coupon rate and pays the $100 once per year.

A.all three bonds are now priced to yield 8% to maturity, what are their prices?

B.you expect their yields to maturity to be 8% at the beginning of next year, what will their prices be then? What is your rate of return on each bond during the one-year holding period?

Reference no: EM132680517

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