Question: 1. (20 points) Consider a 10-year zero coupon bond (face amount $1,000) with an annually compounded yield of 4%? a) What is its price? b

1. (20 points) Consider a 10-year zero coupon bond (face amount $1,000) with an annually compounded yield of 4%? a) What is its price? b What is the annual holding period return if you hold the bond to maturity? c) What will the price of the bond be in l year if the yield rises to 5%? what if it drops to 3%? d) What will the holding period returns be on the bond in the two circumstances described in part (c) above if you sell it in 1 year

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