Suppose you sell a $1,000 bond that matures in 1 year for $950. Calculate the interest rate you will have to pay on this bond.

Question

Quizplus · Accepted Answer

To calculate the interest rate, we need to find out how much interest you will have to pay on a $1,000 bond that matures in 1 year. Since you sold the bond for $950, the interest you will have to pay is $1,000 - $950 = $50. Now, we can use the formula for simple interest: interest rate = (interest / principal) x 100%
Plugging in the values, we get: interest rate = ($50 / $1,000) x 100% = 5%
Therefore, the answer is choice C) 5.3%.

Suppose You Sell a $1,000 Bond That Matures in 1