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BOND VALUATION 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 an 11.5% annual coupon, while Bond Z is a zero coupon bond. a. 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: Years to Maturity Price of Bond C Price of Bond Z 4 __________ __________ 3 __________ __________ 2 __________ __________ 1 __________ __________ 0 __________ __________ b. Plot the time path of prices for each bond. c. d.

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

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Chapter
Section
Chapter 7, Problem 6P
Textbook Problem

BOND VALUATION 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 an 11.5% annual coupon, while Bond Z is a zero coupon bond.

  1. a. 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:
Years to Maturity Price of Bond C Price of Bond Z
4 __________ __________
3 __________ __________
2 __________ __________
1 __________ __________
0 __________ __________
  1. b. Plot the time path of prices for each bond.
  2. c.
  3. d.

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Chapter 7 Solutions

Fundamentals of Financial Management, Concise Edition (MindTap Course List)
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