Suppose a bond with no expiration date has a face value of $10,000 and annually
ID: 1241030 • Letter: S
Question
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $800. In the table provided below, calculate and enter 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.Instructions: For bond prices, round to the nearest dollar. For interest yield, round your answer up to two decimal places.
BOND PRICE INTERESTS YIELD %
$8000 ?
? 8.9
$10000 ?
$11000 ?
? 6.2
What generalization can be drawn from the completed table? There is insufficient data to make a generalization OR Bond price and interest rate are inversely related OR Bond price and interest rate are not related OR Bond price and interest rate are directly related.
Explanation / Answer
Bond Price
Interest rate %
$ 8,000
9,000
10,000
11,000
13,000
10.0
8.9
8.0
7.3
6.2
What generalization can be drawn from the completed table?
Generalization: Bond price and interest rate are inversely related
Bond Price
Interest rate %
$ 8,000
9,000
10,000
11,000
13,000
10.0
8.9
8.0
7.3
6.2
What generalization can be drawn from the completed table?
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