What is the bond price at 12 percent? b. What is the bond price at 8 percent? c. What would be your percentage return on investment if you bought when rates were 12 percent and sold when rates were 8 percent?
What is the bond price at 12 percent? b. What is the bond price at 8 percent? c. What would be your percentage return on investment if you bought when rates were 12 percent and sold when rates were 8 percent?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Refer to Table 10-1, which is based on bonds paying 10 percent interest for 20 years. Assume interest rates in the market (yield to maturity) decline from 12 percent to 8 percent.
a. What is the
b. What is the bond price at 8 percent?
c. What would be your percentage
Transcribed Image Text:## Table 10-1: Bond Price Table
This table illustrates the variations in bond prices with respect to different yields to maturity, considering a bond with a 10% interest payment over a period of 20 years until maturity.
### Table Breakdown:
#### Columns:
- **Bond Price:** This row presents the calculated price of the bond.
- **Yields to Maturity:** Each column represents the bond prices at different yields to maturity ranging from 4% to 25%.
#### Rows (Data Cells):
1. **Principal (PV of $1):**
- 4%: 9,234.12
- 6%: 5,734.45
- 8%: 3,743.42
- 10%: 2,603.47
- 12%: 1,895.21
- 14%: 1,386.23
- 16%: 1,022.00
- 18%: 762.64
- 20%: 583.49
- 25%: 292.21
2. **PV of Coupon (10% Interest Payment):**
- 4%: 9,385.11
- 6%: 9,357.7
- 8%: 9,168.56
- 10%: 8,901.47
- 12%: 8,600.88
- 14%: 8,292.58
- 16%: 7,989.18
- 18%: 7,695.67
- 20%: 7,411.10
- 25%: 6,366.00
3. **Total Bond Price:**
- 4%: 24,896.11
- 6%: 15,139.79
- 8%: 11,584.00
- 10%: 9,504.94
- 12%: 8,006.09
- 14%: 6,867.87
- 16%: 5,935.17
- 18%: 5,111.76
- 20%:
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