Calculate the interest of a $1,000 bond that pays 4.25% annually with a purchase date of...

Calculate the interest of a $1,000 bond that pays 4.25% annually with a purchase date of January 1, 2012 and a maturity date of December 31, 2017.

Expert Solution

Answer:

Number of Perods = 2012 to 2017 = 6 Years

Interest per year = $1,000 x 4.25% = $42.50

Interest for 6 Years = $42.50 x 6 = $255

(or)

Annual Compount interest for 6 Years
                      =   Face Value x (1 + r ) ^n (-) Face Value
                      =   $1,000 x ( 1 + 4.25 %) ^6 (-) $1,000
                      =     $1,000 x (1.0425 ) ^ 6 (-) $1,000
                      =      $1,000 x 1.28368 (-) $1,000
                      =      $1,283.68 ( -) $1,000
                      =       $283.68

Amount of Interest = $283.68

ekkarill92 answered 1 year ago

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