Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 12 percent to 8 percent. a. What is the bond price at 12 percent? Bond price Bond price $ b. What is the bond price at 8 percent? What would be 850 61 $ 1,196 36

Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter4: Bond Valuation
Section: Chapter Questions
Problem 5MC: What would be the value of the bond described in Part d if, just after it had been issued, the...
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Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to
maturity) decline from 12 percent to 8 percent.
a. What is the bond price at 12 percent?
Bond price
$
Bond price
b. What is the bond price at 8 percent?
850.61
$ 1,196 36
c. What would be your percentage return on investment if you bought when rates were 12 percent and sold when rates were 8
percent?
Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.
Return on investment
% profit
Transcribed Image Text:Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 12 percent to 8 percent. a. What is the bond price at 12 percent? Bond price $ Bond price b. What is the bond price at 8 percent? 850.61 $ 1,196 36 c. What would be your percentage return on investment if you bought when rates were 12 percent and sold when rates were 8 percent? Note: Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places. Return on investment % profit
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