Problem:

Bond X is a premium bond making annual payments. The bond pays an 9.7 percent coupon, has a YTM of 7.7 percent, and has 14 years to maturity. Bond Y is a discount bond making annual payments. This bond pays a 7.7 percent coupon, has a YTM of 9.7 percent, and also has 14 years to maturity. Assume the interest rates remain unchanged.

Requirement:

Question 1: What are the prices of these bonds today?

Question 2: What do you expect the prices of these bonds to be in one year?

Question 3: What do you expect the prices of these bonds to be in three years?

Question 4: What do you expect the prices of these bonds to be in eight years?

Question 5: What do you expect the prices of these bonds to be in 12 years?

Question 6: What do you expect the prices of these bonds to be in 14 years?

Note: Please show how to work it out.