Nine years ago you bought a $900,000, 25-year, deep discount bond with a market interest rate of 6.24%. Since

then market rates have risen to 7.65% and you find that you must sell the bond.

a. What was the initial price of the bond?

b. What is the current price of the bond?

c. Calculate the current return on this instrument and compare it to the return you were expecting.

d. Explain whether your return would have been relatively greater or less if you held a 10-year instrument. Support your

conclusion with the appropriate work.