Question

n investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures...

n investor has two bonds in her portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.3%. Bond C pays a 12.5% annual coupon, while Bond Z is a zero coupon bond.

  1. Assuming that the yield to maturity of each bond remains at 8.3% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Round your answers to the nearest cent.
Years to Maturity Price of Bond C Price of Bond Z
4 $   $  
3 $   $  
2 $   $  
1 $   $  
0 $   $  
  1. Select the correct graph based on the time path of prices for each bond.
    The correct sketch is

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