Assume you have a one-year investment horizon and are trying tochoose among three bonds. All have the same degree of default riskand mature in 10 years. The first is a zero-coupon bond that pays$1,000 at maturity. The second has an 8.6% coupon rate and pays the$86 coupon once per year. The third has a 10.6% coupon rate andpays the $106 coupon once per year. a. If all three bonds are nowpriced to yield 8.6% to maturity, what are their prices? (Do notround intermediate calculations. Round your answers to 2 decimalplaces.) Zero 8.6% Coupon 10.6% Coupon Current prices $ 1000 $ 10 $b-1. If you expect their yields to maturity to be 8.6% at thebeginning of next year, what will their prices be then? (Do notround intermediate calculations. Round your answers to 2 decimalplaces.) Zero 8.6% Coupon 10.6% Coupon Price one year from now $ $$ b-2. What is your rate of return on each bond during the one-yearholding period? (Do not round intermediate calculations.Round youranswers to 2 decimal places.) Zero 8.6% Coupon 10.6% Coupon Rate ofreturn % % %
