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Pls help

John Investor purchased a $10,000 bond at 80. The annual interest is 4%.

What was the cost of the bond? $
What was the annual interest? $
What is the yield (to the nearest tenth of a percent)?

2 Answers

2 votes

Answer:

- 8,000.00

- 400.00

- 5.0

User Otherguy
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The cost of the bond was 90/100 times $5,000, that is, $4,500 total.

The annual interest is 5% of $5,000, that is, $250.

The current yield is 5% divided by (90/100), that is 5.555%; round to 5.6% as instructed.

The yield that real bond buyers would be more interested in is the yield to maturity, but this cannot be calculated without knowing the term (number of years). If it's a short term bond that will pay you back $5,000 in just a few years, that would add several percent to the yield, but if it's a 15-year bond the growth of the $4,500 to $5,000 adds only a fraction of 1% to the yield.
User Ar Maj
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