Suppose Harley Davidson Co. issued a global bond that pays annual coupons of $110, matures in 20 years, and its face value is $1,000. YTM equals 11%. What is the bonds quoted price?

One bond has a coupon rate of 7% and another bond a coupon rate of 11%. Both bonds pay interest annually, have 10-year maturities, and sell at a yield to maturity of 10%. a) If their yields to maturity next year are still 10%, what is the rate of return on each bond? b) Does the higher-coupon bond give a higher rate of return over this period?

Assume interest rates increase from 7% to 9%. Which bond will suffer the greater percentage decline in price: a 20-year bond paying annual coupons of 7% or a 20-year zero-coupon bond?