Question

If a one-year bond has a face value of $5,000 and is sold for $4,500, what is the interest rate on the bond?

Answer 1

11.1%

Step-by-step explanation:

The face value is $5000

It is sold for $4,500

Therefore the interest rate of this bond can be calculated as follows

$5000-$4500

= 500

500/4500 × 100

= 0.111 × 100

= 11.1%

Hence the interest rate is 11.1%