Lily Adams purchased a $1,000 bond at 70. The bond pays 4%.
What was the cost of the bond?
What was the annual interest?
What is the yield (to the nearest tenth of a percent)?
how you do it
To find the cost of the bond, we need to calculate 70% (the purchase price as a percentage of the bond's face value) of $1,000.
Cost of the bond = 0.70 * $1,000 = $700.
Now, to find the annual interest, we need to multiply the face value of the bond by the interest rate.
Annual interest = 0.04 * $1,000 = $40.
To calculate the yield, we need to divide the annual interest by the cost of the bond and then convert it into a percentage.
Yield = ($40 / $700) * 100 ≈ 5.71%.
Therefore, the cost of the bond is $700, the annual interest is $40, and the yield (to the nearest tenth of a percent) is 5.7%.