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What will be the holding period rate of return for each bond

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Question - Assume that you are trying to choose which of 3 bonds to buy:

A zero coupon bond

A 5% coupon bond

An 8% coupon bond

Each has a face value of $1,000. They all mature in 10 years, have the same default risk and pay any coupons annually. There are no other special provisions.

1. If the current market rate of interest is 4%, what are the prices of the three bonds?

2. If your holding period is one year only, what will be the holding period rate of return for each bond?

Reference no: EM133076824

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