Answer to Question #5595 in Macroeconomics for Alejandra
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
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%)
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