## (Solution Download) Assume you have a one-year investment horizon and are trying to choose among three bonds. All have t

 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 9 years. The first is a zero-coupon bond that pays \$1,000 at maturity. The second has an 7.4% coupon rate and pays the \$74 coupon once per year. The third has a 9.4% coupon rate and pays the \$94 coupon once per year.

 a. If all three bonds are now priced to yield 7.4% to maturity, what are their prices? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 Zero 7.4% Coupon 9.4% Coupon Current prices \$ \$ \$

 b-1. If you expect their yields to maturity to be 7.4% at the beginning of next year, what will their prices be then? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

 Zero 7.4% Coupon 9.4% Coupon Price one year from now \$ \$ \$

 b-2. What is your rate of return on each bond during the one-year holding period? (Do not round intermediate calculations.Round your answers to 2 decimal places.)

 Zero 7.4% Coupon 9.4% Coupon Rate of return % % %

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