Jeremy purchases a bond that pays $600 in interest. If Jeremy paid $9,000 for the bond, what is the interest rate? If Jeremy paid $10,000 for the bond, what is the interest rate? How did a rise in the price of the bond affect the interest rate?
What will be an ideal response?
When Jeremy paid $9,000 for the bond, the interest rate is ($600 ÷ $9,000 ) × 100 = 6.67 percent. When Jeremy paid $10,000 for the bond, the interest rate is ($600 ÷ $10,000 ) × 100 = 6.00 percent. The rise in the price of the bond brought about a fall in its interest rate.
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