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Item $4$

Assume you have a one$-$year investment horizon and are trying to choose among three bonds. All have the same degree of default risk and mature in $10$ years. The first is a zero$-$coupon bond that pays $$1,000$ at maturity. The second has an $8\%$ coupon rate and pays the $$80$ coupon once per year. The third has a $10\%$ coupon rate and pays the $$100$ coupon once per year. Assume that all bonds are compounded annually.

Required:

If all three bonds are now priced to yield $8\%$ to maturity, what are their prices?

Note: Do not round intermediate calculations. Round your answers to $2$ decimal places.

If you expect their yields to maturity to be $8\%$ at the beginning of next year, what will their prices be then?

Note: Do not round intermediate calculations. Round your answers to $2$ decimal places.

What is your rate of return on each bond during the one$-$year holding period?

Note: Do not round intermediate calculations.