Suppose a one-year discount bond offers to pay $1000 in one year and currently sells for $950.Given this information,we know that the interest rate on the bond is

Question

Quizplus · Accepted Answer

The correct answer is A because the interest rate on the bond can be calculated using the formula: Interest rate = (Face value - Purchase price) / Purchase price * Time to maturity. In this case, the face value is $1000, the purchase price is $950, and the time to maturity is one year. Plugging these values into the formula, we get: Interest rate = (1000 - 950) / 950 * 1 = 5.3%.

Suppose a One-Year Discount Bond Offers to Pay $1000 in One