Posted by **Robert** on Monday, January 11, 2010 at 11:56am.

Go 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 11 percent to 8 percent:

A. What is the bond price at 11%?

B. What is the bond price at 8%?

C. What would be your percentage return on investment if you bought when rates were 11% and sold when rates were 8%?

Table 10-1 Bond price table

(10% Interest Payment, 20Yrs to Maturity)

Yield to Maturity Bond Price

2% $2,308.10

4 1,815.00

6 1,459.00

7 1,317.40

8 1,196.80

9 1,090.90

10 1,000.00

11 920.30

12 850.90

13 789.50

14 735.30

16 643.90

20 513.00

25% $ 407.40

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