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Money & Banking

In Table 5.5, show the derivation of each of the following entries:

a The interest rate of 5.1 percent on a bond sold in 2011 that matures in 7 years.

b The interest rate of 4.4 percent on a bond sold in 2014 that matures in 5 years.

c The interest rate of 4.5 percent on a bond sold in 2018 that matures in 2 years.

Table 5.5 is as following:

Date 1 2 3 4 5 6 7 8 9 10
2011 5.0 5.5 6.0 6.0 5.8 5.5 5.1 5.0 5.0 5.1
2012 6.0 6.5 6.3 6.0 5.6 5.2 5.0 5.0 5.1
2013 7.0 6.5 6.0 5.5 5.0 4.8 4.9 5.0
2014 6.0 5.5 5.0 4.5 4.4 4.5 4.7
2015 5.0 4.5 4.0 4.0 4.2 4.5
2016 4.0 3.5 3.7 4.0 4.4
2017 3.0 3.5 4.0 4.5
2018 4.0 4.5 5.0
2019 5.0 5.5
2020 6.0

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Solution Summary

In Table 5.5, show the derivation of each of the following entries:

a The interest rate of 5.1 percent on a bond sold in 2011 that matures in 7 years.

b The interest rate of 4.4 percent on a bond sold in 2014 that matures in 5 years.

c The interest rate of 4.5 percent on a bond sold in 2018 that matures in 2 years.

$2.19