Consider the Leverage Unlimited, Inc., zero coupon bonds of Year 22. The bonds were issued in Year 1 for $100. Determine the yield-to-maturity if the bonds are purchased at the following price. Round PVIF value in intermediate calculations to three decimal places. Use Table II to answer the question. Round your answers to one decimal place.

A). Issue price of $100 in Year 1. (Note: To avoid a fractional year holding period, assume that the issue and maturity dates are at the midpointJuly 1of the respective years. %

B). Market price as of July 1, Year 19, of $850. %

c). Explain why the returns calculated in Parts a and b are different. Over the period from Year 1 to Year 19, the general level of interest rates declined, causing bond prices to ______and yields to_______ .