Answer to Question #5595 in Macroeconomics for Alejandra

Question

Suppose a bond with no expiration date has a face value of $25,000 and annually pays a fixed amount on interest of $1,500. Compute and enter in the spaces provided either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown.(Bond prices: Round them to two decimal places, do not type the dollar sign ($) nor use commas to separate the thousands. Interest yield: Round to one decimal place)
Bond Price Interest Yield(%)
20000 x
x 6.4%
25000 x
x 5.5%
30000 x

Answer 1

All values are taken from the formula:
Interest yield(%) = ((fixed amount on interest)/face value of the bond)*100%) + ((face value of the bond - bond price)/face value of the bond)*100%)

Bond Price Interest Yield
20000,00 32,5%
24899,58 6,4%
25000,00 6,0%
25118,75 5,5%
30000,00 -11,7%