Princeton Printers recently offered a bond issue which matures in 25 years. Each bond has a future (or maturity) value of $1,000 (so FV = $1,000) and they pay an annual coupon of 6.5% based on FV = $1,000 (therefore, i_coupon = 0.065). If the current market interest rate is 9.0% (meaning r = 9%), what will be the current market price for these bonds given that they have 25 years to maturity?

Now suppose that one year later (just after the next $65 coupon has been paid, therefore there are now 24 remaining) the market rate for the Princeton Printers bond presented above to falls to 4.25% (therefore r = 4.25%). Given that the bond has 24 years until maturity and its future (or maturity) value is still $1,000, what would be the price of the bond under the lower 4.25% market rate? Finally, what would be the one-year rate of return (in percent terms) to an investor who owned this bond for one year? Please round your answer for the rate of return to the second decimal place.

Initial Price of the Bond (PV) =

Second (New) Price of the Bond (PV) =

One-Year Rate of Return =