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.

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%

Thank you. Please rate it.

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