The completion of the table on bond cost, annual interest, and annual yield, rounding each percent to the nearest hundredth, is as follows:
Source Face Value Quoted Cost of Interest Annual Annual
of Bond Price Bond Rate Interest Yield
1. GTE $10,000 98.000 $9,800 5.60% $560 5.71%
2. FRJ INT $12,000 77.000 $9,240 2.50% $300 3.25%
3. GE CAP $5,000 85.500 $4,275 3.20% $160 3.74%
4. SAT TU $20,000 91.375 $18,275 5.40% $1,080 5.91%
The formulas for computing the bond cost, annual interest, and annual yield:
Bond Cost = Face Value x Percent
Annual Interest = Face Value x Interest Rate
Annual Yield = Annual Interest/Bond Cost
1. GTE:
Cost of Bond = $9,800 ($10,000 x 98.000/100)
Annual Interest = $560 ($10,000 x 5.60%)
Annual Yield = 5.71% ($560/$9,800 x 100)
2. FRJ INT:
Cost of Bond = $9,240 ($12,000 x 77.000/100)
Annual Interest = $300 ($12,000 x 2.50%)
Annual Yield = 3.25% ($300/$9,240 x 100)
3. GE CAP:
Cost of Bond = $4,275 ($5,000 x 85.500/100)
Annual Interest = $160 ($5,000 x 3.20%)
Annual Yield = 3.74% ($160/$4,275)
4. SAT TU:
Cost of Bond = $18,275 ($20,000 x 91.375/100)
Annual Interest = $1,080 ($20,000 x 5.40%)
Annual Yield = 5.91% ($1,080/$18,275 x 100)