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Interest Rates and Maturity

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Suppose the U.S. treasury offers to sell you a bond for $747.25. No payments will be made until the bond matures 5 years from now, at which time it will be redeemed for $1000. What interest rate would you earn if you bought this bond at the offer price?

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Solution Summary

This response determines the interest rate one could earn after a bond matures 5 years from now.

Solution Preview

There are two ways of doing this:
A) By formulae:

Future value= Present ...

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