4. Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20...

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Finance

4. Refer to Table 10-1, which is based on bonds paying 10percent interest for 20 years. Assume interest rates in the market(yield to maturity) decline from 16 percent to 6 percent.
a. What is the bond price at 16 percent?
Bondprice
b. What is the bond price at 6 percent?
Bondprice
c. What would be your percentage return oninvestment if you bought when rates were 16 percent and sold whenrates were 6 percent? (Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimalplaces.)
Return oninvestment %

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4.1 Ratings (610 Votes)

aPrice of the Bond at 16 The Market Price of the Bond is the Present Value of the Coupon Payments plus the Present Value of the face Value Face Value of the bond 1000 Annual Coupon Amount 100 1000 x 10 Annual Yield to Maturity 1600 Maturity Period 20 Years Therefore the Market See Answer

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4. Refer to Table 10-1, which is based on bonds paying 10percent interest for 20 years. Assume interest rates in the market(yield to maturity) decline from 16 percent to 6 percent.a. What is the bond price at 16 percent?Bondpriceb. What is the bond price at 6 percent?Bondpricec. What would be your percentage return oninvestment if you bought when rates were 16 percent and sold whenrates were 6 percent? (Do not round intermediatecalculations. Input your answer as a percent rounded to 2 decimalplaces.)Return oninvestment%