Please can someone help me set up this so I can work it out .Not sure the steps.
Clay brought a $500 series EE bond and redeemed it after 4 years for $329.20. How much interest did Clay earn?
the bonds are bought for half of face value ... $250 in this case
bought for $250 ... sold for $329.20 ... how much interest?
79.20 answer THANK YOU FOR THE HELP
To calculate the interest earned on a bond, we need to know the face value of the bond, the redemption value, and the holding period. In this case:
- Face value (or initial investment) of the bond: $500
- Redemption value (or amount received when redeeming): $329.20
- Holding period (or the number of years the bond was held): 4 years
To calculate the interest earned, follow these steps:
Step 1: Subtract the redemption value from the face value to find the difference.
$500 - $329.20 = $170.80
Step 2: Divide the difference by the number of years the bond was held to get the annual interest earned.
$170.80 / 4 = $42.70
Therefore, Clay earned $42.70 in interest over the 4 years.
Keep in mind that this calculation assumes that there were no additional interest or coupon payments made during the holding period, which may not always be the case with bonds.