If a bond was to pay off one year from now for $630 and was purchased for $600, what is the interest rate?

Question

Quizplus · Accepted Answer

The interest earned on the bond is the difference between the payoff amount and the purchase price, which is $630 - $600 = $30. 
To find the interest rate, we can use the following formula:
Interest Rate = (Interest / Purchase Price) x 100%
= ($30 / $600) x 100%
= 0.05 x 100% = 5%
Therefore, the interest rate is 5 percent, which corresponds to choice B.

If a Bond Was to Pay Off One Year from Now