A twenty-year bond with a par value of $100 and with annual coupons at 3.5% is purchased to yield an effective annual rate of interest of 4% if held to maturity. The book value of the bond at any time is the present value of all remaining payments, using the 4% rate. Ten years later, just after a coupon payment, the bond is sold to yield the new purchaser a 5% effective annual rate of interest if held to maturity.

In which of the following ranges is the excess of the book value over the second sale price?

Question A twenty-year bond with a par value of $100 and with annual coupons at 3.5% is purchased to yield an effective annual rate of interest of 4% if held to maturity. The book value of the bond at any time is the present value of all remaining payments, using the 4% rate. Ten years later, just after a coupon payment, the bond is sold to yield the new purchaser a 5% effective annual rate of interest if held to maturity. In which of the following ranges is the excess of the book value over the second sale price? Possible Answers A $4 but $6 but $8 but $10 Question A twenty-year bond with a par value of $100 and with annual coupons at 3.5% is purchased to yield an effective annual rate of interest of 4% if held to maturity. The book value of the bond at any time is the present value of all remaining payments, using the 4% rate. Ten years later, just after a coupon payment, the bond is sold to yield the new purchaser a 5% effective annual rate of interest if held to maturity. In which of the following ranges is the excess of the book value over the second sale price? Possible Answers A $4 but $6 but $8 but $10