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I can buy a $1000 bond for $950. I get $50 / year and it matures in 20 years. What interest rate am I earning?

Respuesta :

The interest rate you are earning on a bond that has a face value of $1000, a price of $950 and a coupon of $50 is 5.42%

What is the interest rate?

The interest rate is the rate of return on the bond given its face value, coupon payments and price.

Interest rate can be determined using a financial calculator:

  • Cash flow in year 0  = -950
  • Cash flow in year 1 to 20 = 50
  • Cash flow in year 20 = 1000

Interest rate = 5.42%

To learn more about interest rate, please check: https://brainly.com/question/14935026

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