Suppose you buy a bond with a face value of $1,000 for $800. What is the interest rate you receive on the bond?

Name: Suppose you buy a bond with a face value of $1,000 for $800. What is the interest rate you receive on the bond?
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Question

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The interest rate (or yield) is calculated as the difference between the face value and the purchase price, divided by the purchase price. Here, ($1,000 - $800) / $800 = 0.25 or 25%.

Suppose You Buy a Bond with a Face Value of $1,000