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part A and B

Ms. Alumm is the portfolio manager for a large insurance company. She is considering investing $1 million to purchase some bonds of Patriot Enterprises, Inc. All of Patriot's bonds have market prices that imply a yield to maturity of 8% "bond equivalent yield" (that is 4% every 6-month period).1 Each Patriot bond is described here, based on a $1,000 face value (par value), which is the promised payment at maturity. Bond A matures in five years and pays a 9% coupon yield ($45 every 6 months on a $1,000 face value bond). Bond B matures in ten years, pays an 8% coupon yield (S40 seminannual payments), and is being offered at par. Bond C is a zero-coupon bond that pays no explicit interest, but will pay the face amount of $1,000 per bond at maturity in ten years. . At what price should each bond currently sell? As an alternative, Ms. Alumm has been invited to invest $1 million in a 10-year Eurobond of a second firm, Nationaliste, S.A.2 Nationaliste bonds are similar in risk to "Bond B" above: they promise an 8% coupon yield for 10 years, but coupons are paid annually, not semiannually. The Nationaliste bonds are priced at a 1% discount from par, or $990 per $1,000 face value. B. What yield to maturity is implied by the Nationaliste Eurobond? Compare this vield to the 8% "bond-equivalent yield" of the Patriot semiannual coupon bond (Bond B) above. In which bond should Ms. Alumm invest

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