Please help with the following problem.
Go 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 11 percent to 8 percent:
a. What is the bond price at 11 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 11 percent and sold when rates were 8 percent?
(10% Interest Payment, 20 Years to Maturity)
Yield to Maturity Bond ...
This solution is comprised of a detailed explanation to answer the interest rate effect on bond price.