Question

The U.S. Treasury offers to sell you a bond for $715.00. No payments will be made until the bond matures 15 years from now, at which time it will be redeemed for $1,000. What interest rate would you earn if you bought this bond at the offer price?

Answer 1

Answer:

interest rate is 2.25 %

Explanation:

given data

sell bond = $715

bond matures =  15 years

redeem =  $1,000

solution

we apply here formula that is

amount = principal × $(1+r)^{t}$    ................1

here put value and we get

1000 = 715  × (1+r)^{15}

$(1+r)^{15}$ = $\frac{1000}{715}$

solve it we get

r = 0.022617

so rate is 2.25 %