Bond valuation An investor has two bonds in her portfolio, Bond C and Bond Z. Ea
ID: 2742320 • Letter: B
Question
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 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 answer to the nearest cent.
Years to Maturity Price of Bond C Price of Bond Z 4 $ $ 3 $ $ 2 $ $ 1 $ $ 0 $ $Explanation / Answer
Year to maturity Price Bond C Price Bond Z 4 $ 1,108.82 $ 729.61 PV(8.2%,4,115,1000)*-1 PV(8.2%,4,0,1000)*-1 3 $ 1,084.74 $ 789.44 PV(8.2%,3,115,1000)*-1 PV(8.2%,3,0,1000)*-1 2 $ 1,058.69 $ 854.17 PV(8.2%,2,115,1000)*-1 PV(8.2%,2,0,1000)*-1 1 $ 1,030.50 $ 924.21 PV(8.2%,1,115,1000)*-1 PV(8.2%,1,0,1000)*-1 0 $ 1,000.00 $ 1,000.00 PV(8.2%,0,115,1000)*-1 PV(8.2%,0,0,1000)*-1