A $$1,000$ par value bond was issued five years ago at a $8$ percent coupon rate. It currently has $25$ years remaining to maturity. Interest

rates on similar debt obligations are now $10$ percent. Use $A_{?}$ ppendix B and $A_{p}pendi{x}_D$ for an approximate answer but calculate your

final answer using the formula and financial calculator methods.

a$.$ Compute the current price of the bond using an assumption of semiannual payments.

Note: Do not round intermediate calculations and round your answer to $2$ decimal places.

Current bond price

b$.$ If Mr$.$ Robinson initially bought the bond at par value, what is his percentage capital gain or loss?

Note: Ignore any interest income received. Do not round intermediate calculations and round your answer to $2$ decimal places.

c$.$ Now assume Mrs$.$ Pinson buys the bond at its current market value and holds it to maturity, what will be her percentage capital gain

or loss?

Note: Ignore any interest income received. Do not round intermediate calculations and round your answer to $2$ decimal places.

d$.$ Why is the percentage gain larger than the percentage loss when the same dollar amounts are involved in parts $b$ and $c?$

The percentage gain is larger than the percentage loss because the investment is larger.

The percentage gain is larger than the percentage loss because the investment is smaller.