How would I figure this out. The equation I’ve been using for bonds is Y=ai/p Ai for annual interest P for price of bond. Question: One year before maturity the price of a bond with a principal amount of $1000 and a coupon rate of 5% paid annually fell to $981. The one-year interest rate must be: A) 7.0% B) 1.9% C) 5.0% D) 8.5% McGrawHill says that 7% is the correct answer but I don’t know how to do the math to get that.

How would I figure this out. The equation I’ve been using for bonds is Y=ai/p Ai for annual interest P for price of bond. Question: One year before maturity the price of a bond with a principal amount of $1000 and a coupon rate of 5% paid annually fell to $981. The one-year interest rate must be: A) 7.0% B) 1.9% C) 5.0% D) 8.5% McGrawHill says that 7% is the correct answer but I don’t know how to do the math to get that.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter26: Monetary Policy

Section: Chapter Questions

Problem 3SQP

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