To estimate rhe difference below,would you round the numbers to the nearest ten, nearest hundred, or nearest thousand?explain. 8
1 answer:
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Answer:
The yield of this new bond is approx 3.8%.
Step-by-step explanation:
Given : Claribel has a $500 bond with a 4% coupon. Claribel purchased this bond for $525.
To find : What is the yield of this new bond?
Solution :
As coupon is 4 % , a $ 500 bond earns is given by,
A $ 500 bond earns $ 20 in a year.
Now as market price of bond is $ 525 , but it earns $ 20
The rate of interest earned is
Therefore, the yield of this new bond is approx 3.8%.