Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800.

a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown.

Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places.

Bond Price Interest Yield, %

$8,000

8.89

$10,000

$11,000

6.15

b. What generalization can you draw from the completed table?

multiple choice

Bond prices and interest rates are inversely related.

Bond prices and interest rates are not related.

Bond prices and interest rates are directly related.

There is insufficient data to make a generalization.