Respuesta :
Answer:
The correct answer for option (a) is 4% and for option (b) is $800.
Explanation:
According to the scenario, the computation for the given data are as follows:
Face value = $1,000
Annual interest = $40
Interest rate = 5%
(a). We can calculate the contractual interest rate by using following formula:
Contractual interest rate = Annual interest ÷ Face value
= $40 ÷ $1000
= 0.04 or 4.0%
(b). we can calculate the price of bonds by using following formula:
Price of bonds = Annual interest ÷ Market interest rate
= $40 ÷ 5%
= $800.00
(a) The contractual interest rate is 4%.
(b) The bond price is $800.
- The calculation is as follows:
(a)
Face value = $1,000
Annual interest = $40
Interest rate = 5%
Contractual interest rate = Annual interest ÷ Face value
= $40 ÷ $1000
= 0.04 or 4.0%
(b)
Price of bonds = Annual interest ÷ Market interest rate
= $40 ÷ 5%
= $800.00
Learn more: brainly.com/question/17429689
