William purchases a savings bond from the United States treasury. The principal amount of the bond is $3000, and the terms of the bond are a %5 yield with a maturity date set for 8 years in the future from the date of purchase. William is trying to calculate his return on his investment. What is the amount of interest William can expect to earn over the lifetime of the bond?
A. $4,200
B. $3,150
C. $1,200
D. $150
To calculate the amount of interest William can expect to earn over the lifetime of the bond, we need to multiply the principal amount of the bond by the yield percentage and the number of years the bond will be held.
The interest earned is calculated as follows:
Interest = Principal * Yield * Time
In this case:
Principal = $3000
Yield = 5% = 0.05 (expressed as a decimal)
Time = 8 years
Interest = $3000 * 0.05 * 8
Interest = $1200
Therefore, the amount of interest William can expect to earn over the lifetime of the bond is $1200.
The correct answer is C. $1,200