Assume an investor buys an 8 percent, semi-annual, 10-year bond at par. He sells it two years later after market interest rates have decreased to 6 percent. The investor's capital gain is closest to:

Question

Quizplus · Accepted Answer

The bond's price will increase as interest rates decrease. The investor will sell the bond for a higher price than he paid for it, resulting in a capital gain.

Assume an Investor Buys an 8 Percent, Semi-Annual, 10-Year Bond