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 $5,600.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 need to use the formula:
PV = FV / (1 + r)^n
Where PV = present value (offer price), FV = future value (redemption value), r = interest rate, and n = number of years.

Plugging in the given values, we get:
3,000 = 5,600 / (1 + r)^10

Solving for r, we get:
r = 6.44%

Therefore, the answer is choice C.