Question

An 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 9.0%. Bond C pays a 12.5% annual coupon, while Bond Z is a zero coupon bond.

A. Assuming that the yield to maturity of each bond remains at 9.0% 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 | $ | $ |

Answer #1

calc:

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Problem 5-17
Bond Value as Maturity Approaches
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yield to maturity of each bond remains at 8.1% over the next 4
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