Question

Suppose the Chief Financial Officer (CFO) of a company is interested in raising funds for a major investment by issuing bonds of varying maturity to investors. One of the longer-term bonds being issued can be purchased for $75,000.00 per bond and pays $7,125.00 annually to the investor. What is the anual interest rate on this bond

Answer 1

9.5%

Step-by-step explanation:

Interest rate on the bond = Annual payment on thr bonds / Cost of the bonds * 100

Interest rate on the bond = 7.125 / 75,000 * 100

Interest rate on the bond = 0.095 * 100

Interest rate on the bond = 9.5%

Thus, the annual interest rate on the bond is 9.5%