Jane Investor purchased a $10,000 bond at 90. The annual interest is 5%.
To calculate the annual interest on the bond, you can follow these steps:
Step 1: Convert the percentage interest rate to decimal form.
- The annual interest rate is 5%, so divide it by 100 to convert it to decimal form:
5% รท 100 = 0.05
Step 2: Determine the annual interest amount.
- Multiply the bond's face value ($10,000) by the annual interest rate (0.05):
$10,000 * 0.05 = $500
Therefore, Jane Investor will earn $500 in annual interest on her $10,000 bond.
To calculate the annual interest on a bond, you need to multiply the face value (also known as the par value) of the bond by the annual interest rate. In this case, the face value of the bond is $10,000 and the annual interest rate is 5%.
Step 1: Calculate the annual interest on the bond
Annual Interest = Face Value of the Bond * Annual Interest Rate
Annual Interest = $10,000 * 0.05
Annual Interest = $500
Therefore, Jane Investor will earn an annual interest of $500 on the bond.
Now, let's discuss the purchase price of the bond. Jane Investor purchased the bond at 90. This means she bought the bond at 90% of its face value. In other words, she paid only 90% of $10,000.
Step 2: Calculate the purchase price of the bond
Purchase Price = Face Value * Purchase Price Percentage
Purchase Price = $10,000 * 0.90
Purchase Price = $9,000
Therefore, Jane Investor purchased the bond for $9,000.
What was the cost of the bond?
What was the annual interest?
What is the yield (to the nearest tenth of a percent)?