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

a. What is the price of the bond?

Bond-

b. Assume 5 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--

c. What would your percentage return be if you bought the bonds when interest rates in the market were 20 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 10-1 Bond price table Yield to Maturity (10% Interest Payment, 20 Years to Maturity) PV of PV of Coupons Principal Bond Price + + + + + + + 29 4% 6% 7% 8% 9% 10% 11% 12% 13% 14% 16% 20% 25% $1,635.14 1,359.03 1,146.99 1,059.40 981.81 912.85 851.36 796.33 746.94 702.48 662.31 592.88 486.96 395.39 $672.97 456.39 311.80 256.42 214.55 178.43 148.64 124.03 103.67 86.78 72.76 51.39 26.08 11.53 11111111111111 $2,308.11 1.815.42 1,458.80 1.317.82 1,196.36 1,09129 1,000.00 920.37 850.61 789.26 735.07 644 27 513.04 406.92 + + + + + + Table 10-2 impact of time to maturity on bond prices (10% Interest Payment, Various Times to Maturity) Time Period in Bond Price with 8% Bond Price with 12% Years to Maturity Yield to Maturity Yield to Maturity 0 $1,000.00 $1,000.00 1 1,018.52 982.14 5 1,079.85 927.90 10 1,134,20 887.00 15 1,171.19 863.78 20 1,196.36 850.61 25 1,213.50 843.14 30 1.225.16 838.90