1. You purchased a bond for $925. The bond has a face value of $1,000 and it pays a dividend once a year. You sold the bond for $850 after 3 years well before the bond reaches maturity. You find that in this investment you made a 4% rate of return. a) What is the amount of dividend that the bond paid you every year? b) What is the interest rate the bond is paying?

Exploring Economics
8th Edition
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter16: The Markets For Labor, Capital, And Land
Section: Chapter Questions
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1. You purchased a bond for $925. The bond has a face value of $1,000 and it pays a
dividend once a year. You sold the bond for $850 after 3 years well before the
bond reaches maturity. You find that in this investment you made a 4% rate of
return.
a) What is the amount of dividend that the bond paid you every year?
b) What is the interest rate the bond is paying?
Transcribed Image Text:1. You purchased a bond for $925. The bond has a face value of $1,000 and it pays a dividend once a year. You sold the bond for $850 after 3 years well before the bond reaches maturity. You find that in this investment you made a 4% rate of return. a) What is the amount of dividend that the bond paid you every year? b) What is the interest rate the bond is paying?
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