Last year,Leah bought a bond for $1,000 that promises to pay $40 a year.This year,a person who buys a bond for $1,000 receives $45 a year.If Leah were to sell her (old)bond,its price would be approximately

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The interest rates have increased since the time Leah bought her bond, hence the reason why a new buyer receives $45 a year. This means that Leah's bond is less valuable in comparison. To calculate the price of the bond, we need to divide the annual coupon payment of $40 by the current yield of the new bond at $45, which gives us 0.8888. We then multiply this by the original price of the bond ($1,000) to get $888.88. Rounded to the nearest dollar, the answer is A) $889.

Last Year,Leah Bought a Bond for $1,000 That Promises to Pay