Question: 8. 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
8. 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 percent? b. What is the bond price at 8 percent? e. What would be your percentage return on investment if you bought when rates were 11 percent and sold when rates were 8 percent? 9. Look at Table 10-1 again, and now assume interest rates in the market (yield to maturity) increase from 9 to 12 percent. a. What is the bond price at 9 percent? b. What is the bond price at 12 percent? c. What would be your percentage return on the investment if you bought when rates were 9 percent and sold when rates were 12 percent? 10. Using Table 10-1, assume interest rates in the market (yield to maturity) are 14 percent for 20 years on a bond paying 10 percent. a. What is the price of the bond? b. Assume five years have passed and interest rate in the market have gone
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