Answer:
Cost = $2200
Annual interest = $120
Yield=5.5%
Step-by-step explanation:
Given: Face value= $2000 , purchasing price = $110, Interest rate = 6%
1) Cost of the bond :
The price of a bond is quoted as a percentage of par value (100).
A bond purchased at a price of 110 means that the cost is
[tex]\frac{2000\times110}{100}=2200[/tex]
2) Annual interest = face value × interest rate = 2000×0.06=120
3) Yield = Annual Interest / Cost = [tex]\frac{120}{2200}=0.054[/tex]= 5.45%
Nearest to tenth of percent Yield=5.5%
