2. Suppose you obtain a $3,000 T-note with a 3% annual rate, paid quarterly, with maturity in 5 years. How much interest will you earn?
P = Po*(1+r)^n.
Po = $3,000.
r = (3%/4)/100% = 0.0075 = Quarterly %
rate expressed as a decimal.
n = 4Comp./yr. * 5yrs. = 20 Compounding
periods.
Solve for P.
I = P-Po.
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To calculate the interest earned on a T-note, you can use the formula:
Interest = Principal x Rate x Time
Given the information provided:
Principal (P) = $3,000
Rate (r) = 3% = 0.03 per year
Time (t) = 5 years
Since the interest is paid quarterly, we need to adjust the time in terms of quarters.
Time (in quarters) = 5 years x 4 quarters per year = 20 quarters
Plugging in the values into the formula, we have:
Interest = $3,000 x 0.03 x 20 = $1,800
Therefore, you will earn $1,800 in interest over the 5-year period.
To calculate the interest earned on a T-note, you will need to use the formula:
Interest = Principal x Rate x Time
In this case, the principal is $3,000, the interest rate is 3% (or 0.03 as a decimal), and the time is 5 years.
First, let's convert the annual rate to a quarterly rate since the interest is paid quarterly. To do this, divide the annual rate by 4:
Quarterly Rate = Annual Rate / Number of Payments per Year
Quarterly Rate = 3% / 4
Quarterly Rate = 0.03 / 4
Quarterly Rate = 0.0075 or 0.75%
Now that we have the quarterly rate, we can calculate the interest earned using the formula mentioned earlier:
Interest = Principal x Rate x Time
Interest = $3,000 x 0.0075 x 5
Calculating this value, we get:
Interest = $112.50
Therefore, you would earn $112.50 in interest on the $3,000 T-note over 5 years.