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 12 to 14 percent. a. What is the bond price at 12 percent?

Bond price =

What is the bond price at 14 percent?

Bond price =

c. What would be your percentage return on the investment if you bought when rates were 12 percent and sold when rates were 14 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 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%