Answer:
Answer is explained in the explanation section below.
Explanation:
Part a.
will be less than $1000.
Reason: + interest = $1000, since interest >0 (Cannot be negative)
Hence,
< $1000
Part b.
Assuming the amount of interest to be i, would be $1000 - I
Rate of interest would be:
($1000 - ($1000-i)) / ($1000 - i) = i / ($1000 - i)
Rate of interest = i / ($1000 - i)
Part c.
If rises, the interest rate on these bonds would come down. Going back to a. = $1000 - i, and if rises, it implies that i reduces, which means that rate of interest will be reduced.
Part d.
If $1000 is a payment two years later, it implies that i (refer to b.) is the interest for two years. Assuming annual compounding, let's calculate rate of interest as follows:
Interest for two year (i) = $1000 - at the rate of i per year
= X i / 100 + ( X (1+i/100))X i/100
We can solve for i to get annual rate of interest.