Question

7.6

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 8.2%. 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 8.2% 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 $   $   Select the correct graph based on the time path of prices for each bond. $appletImage?dbid=1933773898$ $appletImage?dbid=913171627$ $appletImage?dbid=651891184$ $appletImage?dbid=1087678589$ The correct sketch is -Select-ABCDItem 11 .

Answer 1

А В C 1 Year to maturity Price Bond C Price Bond Z 1,108.82 $ -PV(8.2%,4,115,1000)*-1 PV(8.2%,4,0,1000)*-1 $ 2 4 729.61 4 1,084.74 $ =PV(8.2%,3,115,1000)*-1PV(8.2%,3,0,1000)*-1 $ 3 789.44 6 7 1,058.69 $ =PV(8.2%,2,115,1000)*-1PV(8.2%,2,0,1000)* -1 $ 8 2 854.17 9 10 1,030.50 $ =PV(8.2%,1,115,1000)*-1PV(8.2%,1,0,1000)* -1 $ 11 924.21 1 12 13 1,000.00 $ =PV(8.2%,0,115,1000)*-1PV(8.2%,0,0,1000)*-1 $ 14 0 1,000.00 15 16 17 Correct sketch is graph C

Please rate thumbs up