A 6-year bond costs $9,000 and will pay a total of $2,700 interest over its lifetime. What is its annual interest rate ?

Name: A 6-year bond costs $9,000 and will pay a total of $2,700 interest over its lifetime. What is its annual interest rate ?
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Question

A 6-year bond costs $9,000 and will pay a total of $2,700 interest over its lifetime. What is its annual interest rate  ?

Quizplus · Accepted Answer

The annual interest rate can be calculated by dividing the total interest paid by the number of years and then dividing that result by the initial cost of the bond. So, $2,700 interest / 6 years = $450 annual interest. $450 / $9,000 = 0.05, or 5%.

A 6-Year Bond Costs $9,000 and Will Pay a Total