If the dollar price of a bond is $7,500 and the face value of the bond is $8,000,the interest rate is equal to:

Question

Quizplus · Accepted Answer

The formula for calculating the interest rate of a bond is:

Interest rate = (Annual interest payment / Face value of bond) x 100%

We know that the face value of the bond is $8,000. Therefore, to find the annual interest payment, we need to subtract the dollar price of the bond from the face value:

Annual interest payment = Face value - Dollar price
Annual interest payment = $8,000 - $7,500
Annual interest payment = $500

Now we can substitute these values into the formula to find the interest rate:

Interest rate = ($500 / $8,000) x 100%
Interest rate = 0.0625 x 100%
Interest rate = 6.25%

Therefore, the answer is B, 6.67%.

If the Dollar Price of a Bond Is $7,500 and the Face