Question

A 10,000 face value bond costs 9250. What is the discount rate on the bond?

1) 8.5%
2) 9.25%
3) 10%
4) 12%

Answer 1

The discount rate on the bond is 7.5%.

Step-by-step explanation:

The discount rate on the bond can be calculated by finding the difference between the face value of the bond and its cost, and then dividing that difference by the face value. In this case, the face value of the bond is $10,000 and it costs $9,250. The discount rate would be (10,000 - 9,250) / 10,000 = 0.075, or 7.5%. Therefore, none of the options provided (8.5%, 9.25%, 10%, 12%) are correct. The correct answer is 7.5%.