The interest rate of the bond mentioned in the scenario is 25%.
The interest rate of the bond mentioned in the scenario can be calculated using the formula:
Interest Rate = (Face Value - Purchase Price) / Purchase Price
In this scenario, the face value of the bond is $5,000 and the purchase price is $4,000. Plugging these values into the formula:
Interest Rate = (5000 - 4000) / 4000
Interest Rate = 1000 / 4000
Interest Rate = 0.25
So, the interest rate of the bond is 25%, which corresponds to option c) 25%.
Complete Question :
Consider the following scenario when answering the questions that follow:
Your friend Carson is starting a new photography business that specializes in photographs of Central Park in New York City. Because his business is new and risky, he is unable to obtain a loan from the local bank. on June 21, 2013, you agree to pay a price of $4,000 for a bond from Carson. You will receive $5,000 in return on June 21, 2014.
The interest rate of the bond mentioned in the scenario is equal to:
a) 80%
b) 20%
c) 25%
d) 10%
e) 5%