Suppose you purchase a 30-year, zero-coupon bond with a yield to maturity of 6%. You hold the bond for five years before selling it.
a. If the bond s yield to maturity is 6% when you sell it, what is the rate of return of your investment?
b. If the bond's yield to maturity is 7% when you sell it, what is the rate of return of your investment?
c. If the bond's yield to maturity is 5% when you sell it, what is the rate of return of your investment?
d. Even if a bond has no chance of default, is your investment risk free if you plan to sell it before it matures? Explain.