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Refer to Table 10-1, assume interest rates in the market (yield to maturity) are 14 percent for 20 years on a bond paying 10 percent.

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Refer to Table 10-1, assume interest rates in the market (yield to maturity) are 14 percent for 20 years on a bond paying 10 percent. a. What is the price of the bond? Bond price b. Assume five years have passed and interest rates in the market have gone down to 12 percent. Now, using Table 10-2 for 15 years, what is the price of the bond? Bond price c. What would your percentage return be if you bought the bonds when interest rates in the market were 14 percent for 20 years and sold them 5 years later when interest rates were 12 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) Return on investment Table 10-2 Impact of time to maturity on bond prices Time Period in Years to Maturity 0 1 5 10 15 20 25 30 (10% Interest Payment, Various Times to Maturity) Bond Price with 8% Yield to Maturity $1,000.00 1,018.52 1,079.85 1,134.20 1,171.19 1,196.36 1,213.50 1,225.16 Bond Price with 12% Yield to Maturity $1,000.00 982.14 927.90 887.00 863.78 850.61 843.14 838.90

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