3. Suppose you are looking to buy a bond that promises to pay $600,000 on the date of maturity in one year. A. If you bid for the bond and wind up paying a price of $590,000, solve for the interest rate on this bond. Round your answer to four decimal places. b. If on the next day, you bid for the bond and pay a price of $575,000, solve for the interest rate on the bond now. Round your answer to four decimal places. C. What is the relationship between the bond price and the interest rate on the bond?

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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3. Suppose you are looking to buy a bond that promises to pay $600,000 on the date of maturity
in one year.
A. If you bid for the bond and wind up paying a price of $590,000, solve for the interest rate
on this bond. Round your answer to four decimal places.
b. If on the next day, you bid for the bond and pay a price of $575,000, solve for the interest
rate on the bond now. Round your answer to four decimal places.
C. What is the relationship between the bond price and the interest rate on the bond?
Transcribed Image Text:3. Suppose you are looking to buy a bond that promises to pay $600,000 on the date of maturity in one year. A. If you bid for the bond and wind up paying a price of $590,000, solve for the interest rate on this bond. Round your answer to four decimal places. b. If on the next day, you bid for the bond and pay a price of $575,000, solve for the interest rate on the bond now. Round your answer to four decimal places. C. What is the relationship between the bond price and the interest rate on the bond?
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