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#12. A $500 mini-bond for a certain city earns 4.83% APR compounded continuosuly, but the bond...

#12. A $500 mini-bond for a certain city earns 4.83% APR compounded continuosuly, but the bond must be held on to by the purchaser for 14 years. If 3 of these bonds are purchased for an investment, then what will the value of this investment be when the bonds mature 14 years later? Use two decimal place accuracy.
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Answer #1

Value of bond

500

APR

4.83%

Maturity period

14

No. of bonds

3

Present value of investment

1500

Compounding frequency

Continuous compounding

Future value of investment = Present value of investment x FV factor

Future value of investment = Present value of investment x e^(APR x maturity period)

Future value of investment = 1500 x e^(4.83% x 14)

Future value of investment = 1500 x e^(0.6762)

Future value of investment = 1500 x 2.7183^(0.6762); e value is 2.7183

Future value of investment = 1500 x 1.9664

Future value of investment = $ 2,949.60 ---> Value of investment when bond matures in 14 years

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