Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $700. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,000 7.78 $10,000 $11,000 5.38 b. What generalization can you draw from the completed table? Bond prices and interest rates are directly related. Bond prices and interest rates are not related. O Bond prices and interest rates are inversely related. O There is insufficient data to make a generalization. O O O O
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $700. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,000 7.78 $10,000 $11,000 5.38 b. What generalization can you draw from the completed table? Bond prices and interest rates are directly related. Bond prices and interest rates are not related. O Bond prices and interest rates are inversely related. O There is insufficient data to make a generalization. O O O O
Chapter13: Monetary Policy: Conventional And Unconventional
Section: Chapter Questions
Problem 4TY
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Transcribed Image Text:Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $700.
a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the
bond prices listed or the bond price at each of the interest yields shown.
Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For
interest yields, round your answers to 2 decimal places.
Bond Price
Interest Yield, %
$8,000
7.78
$10,000
$11,000
5.38
b. What generalization can you draw from the completed table?
Bond prices and interest rates are directly related.
Bond prices and interest rates are not related.
Bond prices and interest rates are inversely related.
There is insufficient data to make a generalization.
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