Elena owns a bond with a price of $5,000, which pays $500 per year.The price of the bond rises in the bond market to $7,500.What is the new interest rate on the bond?

Question

Quizplus · Accepted Answer

The original interest rate on the bond is calculated as follows:
$500/$5,000 = 0.1 or 10%

When the bond price rises to $7,500, the new interest rate is calculated as follows:
$500/$7,500= 0.0667 or 6.67%

Therefore, the answer is D) 6.67 percent.

Elena Owns a Bond with a Price of $5,000, Which