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Interest Rate Effect on Bond Price Valuation

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See attached file for full problem description.

Go to Table 10-1 (attached) 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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The solution calculates the bond price based on different interest rates.

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a.What is the bond price at 11 percent?

$920.3
b. What is the bond price at 8 ...

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