Question

If a discount bond has a 10-year maturity and a face value of $2,000 is purchased...

If a discount bond has a 10-year maturity and a face value of $2,000 is purchased for a price of $1,600, choose the correct formula to calculate its interest rate.

Select one:

A. $1600 = $2000 x (1 + i)10

B. $1600 = $2000 / (1 + i )10

C. $2000 = $1600 / (1 + i)10

D. There is not enough information to determine the interest rate for this bond.

If a discount bond has a 10-year maturity and a face value of $2,000 is purchased for a price of $1,600, choose the correct formula to calculate its interest rate.

Select one:

A. $1600 = $2000 x (1 + i)10

B. $1600 = $2000 / (1 + i )10

C. $2000 = $1600 / (1 + i)10

D. There is not enough information to determine the interest rate for this bond.

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Answer #1

So, The correct answer is option B. As Computed by IRR approach. And all other options are incorrect.

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