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2 June, 15:23

You have just purchased a U. S. Treasury bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1,000. What interest rate will you earn on this bond

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  1. 2 June, 15:31
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    6% interest rate

    Explanation:

    The equation you should use is just a variation of the PV formula:

    r = (FV/PV) 1/t - 1

    r = ($1000/$747.25) 1/5 - 1

    r = 6% interest rate

    The interest rate i will eventually earn on this bond is 6%
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