Reference no: EM132140935

Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $900.

a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed below or the bond price at each of the interest yields shown.    

Bond price Interest Yield,%

$ 8,500

$ 9.47%

$ 10,500

$ 11,500

$ 6.67%

b. What generalization can be drawn from the completed table? 

• Bond prices and interest rates are not related.
• Bond prices and interest rates are directly related.
• Bond prices and interest rates are inversely related.
• There is insufficient data to make a generalization.