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The Treasury Department is currently holding an open auction on bonds.  Each bond has a face value...

The Treasury Department is currently holding an open auction on bonds.  Each bond

has a face value of $2,000,000.  

  1. Suppose you pay $1,950,000 for the bond at auction.  Solve for the interest rate

you receive on this bond.

  1. Suppose you pay $1,900,000 for the bond at auction.  Solve for the interest rate

you receive on this bond.

  1. What is the relationship between bond prices and the corresponding interest rate?
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