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 8.8%. Bond C pays a 10% annual coupon, while Bond Z is a zero coupon bond. a. Assuming that the yield to maturity of each bond remains at 8.8% 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 4 4 4 Select the correct graph based on the time path of prices for each bond. Bond Price! $12001 $1,000 $8001 Bond Z $600 $400 T Type here to search o * e @ N - ^ . 49) 4:05 PN 2/28/20

Answer 1

2 1 E F G H I J K L A I 0 Bond C Bond z $ 1,039.05 $ 713.65 Chart Title =PV(8.8%,4,100,1000)*-1 =PV(8.8%,4,0,1000)*-1 $1,200.00 $ 1,030.48 $ 776.45 $1,000.00 =PV(8.8%,3,100,1000)*-1 =PV(8.8%,3,0,1000)*-1 $800.00 $ 1,021.17 $ 844.78 $600.00 EPV(8.8%,2,100,1000)*-1 =PV(8.8%,2,0,1000)*-1 $400.00 $ 1,011.03 $ 919.12 =PV(8.8%,1,100,1000)*-1 =PV(8.8%,1,0,1000)*-1 $200.00 $ 1,000.00 $ 1,000.00 1 3 =PV(8.8%,0,100,1000)*-1 =PV(8.8%,0,0,1000)*-1 Bond C Bond z 17 Correct graph is C

*Please rate thumbs up