On Dec 1,2007,you could buy a 10-year U.S.Treasury note(a kind of bond)for $10,000 that pays 4.21% simple interet every year through Dec 28,2017.How much total interest would it earn by then? Thanks!
You will get simple interest on the principal amount ($10,000) at 4.21%, given by:
Simple Interest=10000*0.0421*n
where n is the number of years equal to 10 years (ending on Dec 1, 2017) and 27 days from Dec 1, 2017 to Dec. 28, 2017, which is 27/365 years.
So n=10 27/365 in the above formula.
Please help solve the below question.I made a mistake on my first post.Show work please!
On Dec 28,2007,you could buy a 10-year U.S.Treasury note(a kind of bond)for $10,000 that pays 4.21% simple interet every year through Dec 28,2017.How much total interest would it earn by then? Thanks
The above answer stays, since the only change is the period from 10 years and 27 days to 10 years, so n is exactly 10 in the above formula:
Simple Interest=10000*0.0421*n
To calculate the total interest the 10-year U.S. Treasury note would earn by December 28, 2017, we need to determine the annual interest payment and then multiply it by the number of years.
Firstly, let's calculate the annual interest payment. The bond pays a simple interest of 4.21% every year. Since the bond's face value is $10,000, the annual interest payment would be:
Annual Interest = Face Value * Interest Rate
Annual Interest = $10,000 * 4.21% = $421
Now, let's calculate the number of years from December 1, 2007, to December 28, 2017.
Number of Years = December 2017 - December 2007 + 1
Number of Years = 10
Lastly, we multiply the annual interest by the number of years to find the total interest earned:
Total Interest = Annual Interest * Number of Years
Total Interest = $421 * 10 = $4,210
Therefore, the total interest earned by the 10-year U.S. Treasury note by December 28, 2017, would be $4,210.