The central bank is selling $100 worth of bonds payable in one year. The price it gets today is $95. What is the implicit interest rate?
Question
Solution 1
To calculate the implicit interest rate, we need to use the formula:
Implicit Interest Rate = (Face Value - Purchase Price) / Purchase Price * 100
In this case, the face value of the bond is $100 and the purchase price is $95. Plugging these values into the formula, we get:
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