Question

Bob has purchased a U.S. savings bond for his newborn daughter for $1000. The bond will...

Bob has purchased a U.S. savings bond for his newborn daughter for $1000. The bond will mature to a value of $1950 when his daughter is 18 years old. What interest rate does this bond have knowing that savings bonds grow according to simple interest.

Homework Answers

Answer #1

We know that

Simple Interest = PTR /100

Here P= Principle

T= Time period

R= Rate of intrest

Principle = $ 1000

Future Value = $ 1950

Interest = Future value - Present value

= $ 1950-$ 1000

= $ 950

So the intrest amount is $ 950.

Here Principal = $ 1000

Time period = 18 Years

Simple Intrest = PTR /100

$ 950= $ 1000*18*R/100

$ 950 = $ 18000R/100

$ 950*100 = $ 18000 R

$ 95000/$ 18000 = R

5.2778% = R

Hence the rate of inetrest is 5.2778%

If you are having any doubts,please post a comment.

Thank you. Please rate it.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Shriver Corp. purchased five $1000 4​% bonds of Simplex Corporation when the market rate of interest...
Shriver Corp. purchased five $1000 4​% bonds of Simplex Corporation when the market rate of interest was ​10%. Interest is paid​ semiannually, and the bonds will mature in six years. Using the PV function in Excel®​, compute the price Shriver paid​ (the present​ value) for the bond investment.​ (Assume that all payments of interest and principal occur at the end of the period. Round your answer to the nearest​ cent.) Shriver paid $___ on the bond investment
Bond valuation-Semiannual interest   Find the value of a bond maturing in 10 ​years, with a ​$1000...
Bond valuation-Semiannual interest   Find the value of a bond maturing in 10 ​years, with a ​$1000 par value and a coupon interest rate of 8​% ​(4​% paid​ semiannually) if the required return on​ similar-risk bonds is 18​% annual interest left parenthesis 9 % paid​ semiannually). The present value of the bond is $
Bond price: QBE Insurance Group Ltd has outstanding bonds with a face value of $1000 that...
Bond price: QBE Insurance Group Ltd has outstanding bonds with a face value of $1000 that will mature in 6 years and pay an 8 percent coupon, interest being paid semiannually. If you paid $1036.65 today and your required rate of return was 6.6 percent, did you pay the right price for the bond?
7. Pablo just purchased a bond for $1,024.75. The bond has a face value of $1,000...
7. Pablo just purchased a bond for $1,024.75. The bond has a face value of $1,000 and a 10 percent coupon rate, with coupon interest paid annually. Pablo’s broker told him that the yield to maturity on this bond is 9.5%; however, the broker did not tell him when the bond would mature. Calculate how many years this bond has left until it matures.
At the beginning of his current tax year, David invests $12,080 in original issue U.S. Treasury...
At the beginning of his current tax year, David invests $12,080 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 15 years. David receives $780 in interest ($390 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 5.8 percent. (Round your intermediate calculations to the nearest whole dollar amount.) a. How much interest income will he report this year if he elects to...
he wants to have a secure university education for his lovely daughter Daisy. His daughter is...
he wants to have a secure university education for his lovely daughter Daisy. His daughter is now 13 years old. She plans to enroll at the University of Professional Studies, Accra in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year (for everything – her food, clothing, tuition, books, transportation, and so forth) is GH¢ 12,000 per year. This cost is expected to remain constant throughout the four-year university education. The...
A 5% coupon rate bond issues by Google has a face value of $1000, pays interest...
A 5% coupon rate bond issues by Google has a face value of $1000, pays interest semiannually, and will mature in 20 years. If the current market rate is 2% interest compounded semiannually, what is the bond’s price?
At the beginning of his current tax year, David invests $11,700 in original issue U.S. Treasury...
At the beginning of his current tax year, David invests $11,700 in original issue U.S. Treasury bonds with a $10,000 face value that mature in exactly 10 years. David receives $560 in interest ($280 every six months) from the Treasury bonds during the current year, and the yield to maturity on the bonds is 3.6 percent. How much interest income will he report this year if he elects to amortize the bond premium?
A few years ago, Spider Web, Inc. issued bonds with a 12.26 percent annual coupon rate,...
A few years ago, Spider Web, Inc. issued bonds with a 12.26 percent annual coupon rate, paid semiannually. The bonds have a par value of $1,000, a current price of $700, and will mature in 12 years. What would the annual yield to maturity be on the bond if you purchased the bond today? Flower Valley Company Bonds have a 13.91 percent coupon rate. Interest is paid semiannually. The bonds have a par value of $1000 and will mature in...
You are currently considering buying an Ecolab corporate bond. The bond has the following characteristics: The...
You are currently considering buying an Ecolab corporate bond. The bond has the following characteristics: The current year is 2018 $1000 Par value of bond 8% Coupon rate   Bond was issued in 2013 Bond will mature in 2043 Payments are made semi-annually Callable 10 years after issue Call price $1050 Current market interest rate   6% What is this bond's current yield? What is this bond's yield - to - maturity? What is this bond's yield - to - call? Why...