Question

You want to buy a 13-year bond with a maturity value of $10,000, and you wish to get a return of 7.25% annually. How much will you pay? (Round your answer to the nearest cent.)

____$

Calculate, to the nearest cent, the future value FV (in dollars) of an investment of $10,000 at the stated interest rate after the stated amount of time.

3.5% per year, compounded quarterly (4 times/year), after 7 years

FV $______

Answer 1

a.Present value=10,000*Present value of discounting factor(rate%,time period)

=10,000/1.0725^13

=10,000*0.402564143

=$4025.64(Approx)

b.We use the formula:  
A=P(1+r/4)^4n
where   
A=future value
P=present value  
r=rate of interest
n=time period.

A=10,000*(1+0.035/4)^(4*7)

=10,000*1.27626052

=$12762.61(Approx)