Joe McCain purchased 5 $1,000 bonds at 89. The bonds pay 6%.
What was the cost of the bonds? $4,450 ?
What was the total annual interest?
What is the yield?
4450 is right.
Interest/year = 0.06 x 5000 = ?
yield = (300/4450)*100 =
To find the cost of the bonds, we multiply the number of bonds by the purchase price of each bond:
Cost of the bonds = Number of bonds * Purchase price per bond
Cost of the bonds = 5 * $1,000 * 0.89
Cost of the bonds = $4,450
The total annual interest is calculated by multiplying the cost of the bonds by the bond's interest rate:
Total annual interest = Cost of the bonds * Interest rate
Total annual interest = $4,450 * 0.06
Total annual interest = $267
The yield is calculated by dividing the total annual interest by the cost of the bonds, and then multiplying by 100 to express it as a percentage:
Yield = (Total annual interest / Cost of the bonds) * 100
Yield = ($267 / $4,450) * 100
Yield = 6%
To find the cost of the bonds, we need to multiply the number of bonds purchased by the purchase price of each bond.
The cost of the bonds can be calculated as follows:
Cost of bonds = Number of bonds purchased x Purchase price per bond
= 5 x $1,000 x 0.89 (since 89% is equivalent to 0.89)
= $4,450
So, the cost of the bonds is indeed $4,450.
Next, to find the total annual interest, we multiply the cost of the bonds by the interest rate:
Total annual interest = Cost of bonds x Interest rate
= $4,450 x 6%
= $267
Therefore, the total annual interest is $267.
Finally, to calculate the yield, we divide the total annual interest by the cost of the bonds, and then multiply by 100 to express it as a percentage:
Yield = (Total annual interest / Cost of bonds) x 100
= ($267 / $4,450) x 100
= 6%
Hence, the yield of the bonds is 6%.