Two bonds are available on the market as follows:

Bond 1: Face value $750, y years to maturity at a (simple) interest rate of 5%.

Bond 2: Face value $500, 3 years to maturity at a (simple) interest rate of r.

Given that the total return of Bond 1 is $1,000 calculate y.

Step-by-step explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

P represents the principal or initial amount invested.

R represents the interest rate.

T represents duration of the investment in years

From the information given,

P = $750

R = 5%

T = y years

I = the total return of Bond 1 - principal

I = 1000 - 750 = $250

Therefore,

250 = (750 * 5 * y) / 100

250 = 37.5y

y = 250/37.5

y = 6.7 years