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    Interest Rate Effect on Bond price

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    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?

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    Solution Preview

    Table 10-1:
    (10% Interest Payment, 20 Years to Maturity)
    Yield to Maturity Bond ...

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    This solution is comprised of a detailed explanation to answer the interest rate effect on bond price.