Problem 10-9 Interest rate effect (LO10-3) 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) increase from 8 to 10 percent a. What is the bond price at 8 percent? Bond price b. What is the bond price at 10 percent? Bond price b. What is the bond price at 10 percent? Bond price c. What would be your percentage return on the investment if you bought when rates were 8 percent and sold when rates were 10 percent? (Do not round Intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Return on investment Table 10-1 Bond price table Yield to Maturity + + 296 4% 6% 796 896 996 10% 119 12% 1396 1496 16% 20% 25% (10% Interest Payment, 20 Years to Maturity) PV of PV of Coupons Principal $1,635.14 $672.97 1,359.03 456.39 1,146.99 311.80 1,059.40 258.42 981.81 214.55 912.85 178.43 851.36 148.64 796.33 124.03 746.94 103,67 702.48 86.78 662.31 72.76 592.88 51.39 486.96 26.08 395.39 11.53 1111111111111111 Bond Price $2,308.11 1,815.42 1,458.80 1,317.82 1,196.36 1,091.29 1,000.00 920.37 850.61 789.26 735.07 644.27 513.04 406.92 + + + + + +