Question: 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)

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) decline from 20 percent to 10 percent.

c. What would be your percentage return on investment if you bought when rates were 20 percent and sold when rates were 10 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)

Table 10-1 Bond price table Yield to Maturity 2% 4% 6% 7% 8% 9% (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 + + + + + + 10% 11% 12% 13% 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 || || || || || || || || || || || || || || + + + + + + + + 14% 16% 20% 25%

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