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The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $100, what will be the interest rate yield to a new buyer of the bond

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Rumpelstilkski

Answer:

16.7 percentage

Explanation:

bond price = $1000 - $100 = $900

fixed amount / bond price * 100 = IR

(150/900) * 100 = 16.7%

The reason for this equation is that interest rate is the amount a lender charges for the use of assets expressed as a percentage of the principal.

originally the price if the bond is $1000 which later falls by $100, so that leaves us to a $900 bond rate.

The interest rate is typically noted on a annual basis known as the annual percentage rate (APR).

abiolataiwo2015

Based on the information given the interest rate yield to a new buyer of the bond is 16.7%.

Using this formula

Interest rate yield = Annual Interest Payment / Market Price

Where:

Annual interest payment=$150

Market price=($1,000-$100)

Let plug in the formula

Interest rate yield=  $150 / ($1,000 - $100)

Interest rate yield=$150/$900

Interest rate yield = 0.1667×100

Interest rate yield= 16.67%

Interest rate yield=16.7%(Approximately)

Inconclusion the interest rate yield to a new buyer of the bond is 16.7%.

Learn more here:https://brainly.com/question/25531514

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