Price appreciation and not interest income

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Bond returns for 2016 are going through the roof.? However, the bulk of the gains are from price appreciation and not interest income. Bond values have surged due to all the economic uncertainty and falling interest rates.? Overall, U.S. Treasuries are up? 12% for the year while those with maturities of 15 or more years are up? 38%.

Bond traders are doing well but savers are suffering from the current status quo.? Savers, or those relying on bonds for current? income, are not attempting to trade bonds for income but instead hold them for the interest income which is near? all-time lows.  

1. What is the value of a? 4% coupon rate bond? $1,000 face value with 20 years to maturity if market rates on similar risk bonds are? 5%?     

A. ?$987.21

B. ?$1,124.62

C. ?$875.38

D. none of these

Reference no: EM131873125

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