6.9k views
4 votes
Two bonds are available on the market as follows: Bond 1: Face value $250, 5 years to maturity at a simple interest rate of 5%. Bond 2: Face value $350, 3 years to maturity at a simple interest rate of r. Given that both bonds yield the same interest at maturity, calculate r. Round your answer to the nearest hundredth of a percent. Do NOT round until you have calculated your final answer.

User Dmmfll
by
4.3k points

2 Answers

3 votes

Answer:

5.95%

Explanation:

User Troller
by
5.0k points
4 votes

Answer:

5.95%

Explanation:

Bond 1:

I = 250(.05)5

I = $62.50

Bond 2:

62.5 = 350(3)r

62.5 = 1050r

r = 62.5/1050

r = 5.95%

User Sorter
by
4.4k points