Refer to Table 10-1, assume interest rates in the market (yield to maturity) are 12 percent for 20 years on a bond paying 10 percent. a. What is the price of the bond? b. Assume 15 years have passed and interest rates in the market have gone down to 12 percent. Now, using Table 10-2 for 5 years, what is the price of the bond? c. What would your percentage return be if you bought the bonds when interest rates in the market were 12 percent for 20 years and sold them 15 years later when interest rates were 12 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.) My Questions | bart!...Table 10-1 Bond price tableYield toMaturity2964966%7%8%9%10%11%12%13%14%16%- 20%25%(10% Interest Payment, 20 Years to Maturity)PV ofPV ofCouponsPrincipal$1,635.141,359.031,146.991,059.40981.81912.85851.36796.33746.94702.48662.31592.88486.96395.39table_10-1.jpg (556x...++fi+++++$672.97456.39Time & Attendance:311.80258.42214.55178.43148.64124.03103.6786.7872.7651.3926.0811.53666|| || || || || || || || || || || || || ||Bond Price$2,308.111,815.421,458.801,317.821,196.361,091.291,000.00920.37850.61789.26735.07644.27513.04406.92 Table 10-2 Impact of time to maturity on bond pricesMETime Period inYears to MaturityOT0120(10% Interest Payment, Various Times to Maturity)Bond Price with 8%Yield to Maturity$1,000.001,018.521,079.851,134.201,171.191,196.361,213.501,225.16Bond Price with 12%Yield to Maturity$1,000.00982.14927.90887.00863.78850.61843.14838.90

Bond price is referred to the price which is calculated on the basis of coupon amounts and…

Answered: Refer to Table 10-1, assume interest…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Refer to Table 10-1, assume interest rates in the market (yield to maturity) are 12 percent for 20 years on a bond paying 10 percent.

a. What is the price of the bond?

b. Assume 15 years have passed and interest rates in the market have gone down to 12 percent. Now, using Table 10-2 for 5 years, what is the price of the bond?

c. What would your percentage return be if you bought the bonds when interest rates in the market were 12 percent for 20 years and sold them 15 years later when interest rates were 12 percent? (Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places.)