(a) Assume that a one year bond that has no interest coupon payment with a maturity value (face value) of $1,000 sold for $800. What is the interest rate that this bond will pay when it matures. Please show how you got you answer.
(b) If the prices of similar bonds are selling next month for $70, what is the interest rate that these bonds pay now when they mature. Please show how you got your answer.
(c) Please describe the relationship between bond prices and interest rates. Use the numbers above to support your answer.
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