An investor has two bonds in his or her portfolio, Bond C and Bond Z. Each matures in 4 years, has a...

Question

An investor has two bonds in his or her portfolio, Bond C and Bond Z. Each matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.8%. Bond C pays a 11.5% annual coupon while Bond Z is a zero coupon bond. Assuming that the yield to maturity of each bond remains at 8.8% over the next 4 years, calculate the price of the bonds at the following years to maturity and fill in the following table. Round your answers to two decimal places.

Robert · Accepted Answer

Here is the Prices: 
Bond C Bond Z 
4 Years: 4 Years: 
Settlement Date 01/01/00 Settlement Date 01/01/00 
Maturity Date 01/01/04 Maturity Date 01/01/04 
Coupon Rate 10.00% Coupon Rate 0.00% 
Yield to Maturity 9.60% Yield to Maturity 9.60% 
Redemption Value (% of par) 100 Redemption Value (% of par) 100 
Number of Payments 1 Number of Payments 1 
Price (% of par) 101.2790034 $1,012.79 Price (% of par) 69.30391734 $693.04 
 
3 Years: 3 Years: 
Settlement Date 01/01/00 Settlement Date 01/01/00 
Maturity Date 01/01/03 Maturity Date 01/01/03 
Coupon Rate 10.00% Coupon Rate 0.00% 
Yield to Maturity 9.60% Yield to Maturity 9.

An investor has two bonds in his or her portfolio, Bond C and Bond Z. Each matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.8%. Bond C pays a 11.5% annual coupon while...

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