Suppose the U.S.Treasury offers to sell you a bond for $3,000.No payments will be made until the bond matures 10 years from now,at which time it will be redeemed for $4,000.What interest rate would you earn if you bought this bond at the offer price?

Question

Quizplus · Accepted Answer

To calculate the interest rate, we can use the formula:

Interest Rate = (Face Value - Purchase Price)/Purchase Price * (1/Number of Years)

Plugging in the values from the question, we get:

Interest Rate = (4000-3000)/3000 * (1/10) = 0.0333 or 3.33%

Therefore, the best choice is C.