Question

Suppose the Chief Financial Officer (CFO) of a company is interested in raising funds for a major investment by issuing bonds of varying maturity to investors. One of the longer-term bonds being issued can be purchased for $ 25,000.00 per bond and pays $ 1,900.00 annually to the investor. What is the anual interest rate on this bond?

Answer 1

Answer:

The anual interest rate on this bond is 7.6%.

Step-by-step explanation:

The total amount to be invested per bond is 25,000.00 that will be 100% for us, while the return for this investment is 1,900.00. We need to calculate how many percentages the return is related to the amount invested. In order to do that we can use the rule of three as stated bellow:

25,000.00 -> 100%

1,900.00 -> x %

25,000.00*x = 1,900.00*100

25,000*x = 190,000

x = 190,000/25,000 = 7.6 %

The anual interest rate on this bond is 7.6%.