You are an aggressive investor. The information for the bonds (with face value of $1,000) available on the market is as follows:

• Zero-coupon bond with 25 years left to maturity
• 8%, 25-year bond with annual payments

Original interest rate is 9%

You believe that market interest rates are going to decline by 2% in one year. Using present value method, calculate the expected total return in percentage for both bonds.

Answer rating: 100% (QA)

To calculate the expected total return for the two bonds we need to consider the change in market in... View the full answer