Go to table 10-1 on page 291, which is based on bonds paying 10 percent interest

Question

Go to table 10-1 on page 291, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) go from 10 percent to 7 percent. a. What was the bond price at 10 percent? b. What is the bond price at 7 percent c. What would be your percentage return on investment if you bought when rates were 10 percent and sold when rates were 7 percent? Yield to Maturity Bond Price 2 2308.10 4 1815.00 6 1459.00 7 1317.00 8 1196.80 9 1090.90 10 1000.00 11 920.30 12 850.90 13 789.50 14 735.30 16 643.90 20 513.00 25% 407.40

Explanation / Answer

1,000

1,317

31,7%

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