Suppose you are deciding whether or not to buy a particular bond for $5,980.17. If you buy the bond and hold it for 5 years, then at that time you will receive a payment of $10,000. You will buy the bond today if the interest rate is
A)no less than 9.48 percent.
B)no greater than 9.48 percent.
C)no less than 10.83 percent.
D)no greater than 10.83 percent.

Question

Quizplus · Accepted Answer

The bond's future value is $10,000, and its present value is $5,980.17. To find the interest rate, we use the formula for compound interest: FV = PV * (1 + r)^n. Solving for r gives an interest rate of approximately 10.83%. You would buy the bond if the interest rate is no greater than this rate.

Suppose You Are Deciding Whether or Not to Buy a Particular