Question

Grand Opening Bank is offering a​ one-time investment opportunity for its new customers. A customer opening a new checking account can buy a special savings bond for

​$800

​today, which the bank will compound at

5.5​%

for the next ten years. The savings bond must be held for at least five​ years, but can then be cashed in at the end of any year starting with year five. What is the value of the bond at each​ cash-in date up through year​ ten? ​

Answer 1

Future value = Initial Investment * ( 1 + interest rate )ⁿ

                    = 800 * ( 1 + 0.055 )ⁿ

Year	Calculation	Value of bond at end of each year
5	800 * ( 1 + 0.055 )5	1045.57
6	800 * ( 1 + 0.055 )6	1103.07
7	800 * ( 1 + 0.055 )7	1163.74
8	800 * ( 1 + 0.055 )8	1227.75
9	800 * ( 1 + 0.055 )9	1295.28
10	800 * ( 1 + 0.055 )10	1366.52