Your friend Earl is starting a dog-grooming service called "Petsgroom." Because his business is new and risky,he is unable to obtain a loan from the local bank.You agree to pay a price of $7,250 for a one-year bond from Earl.
a. Calculate the face value of the bond with an interest rate of 3.4%.
b. Calculate the face value of the bond with an interest rate of 6.7%.
c. Comment on the relationship between the purchase price of the bond and the interest rate.
Correct Answer:
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b.$7,735.75
c.The interest r...
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