Suppose that you buy a bond for $100 that pays 4 percent interest per year. How much money will you have earned when the bond reaches maturity in five years?
Assuming that the bond is a simple-interest bond..... In year 1, the bond pays 100*.04=$4. In year 2 the bond again pays $4. In each of the years 3,4, and 5 the bond pays $4. So, over 5 years, the bond pays.....
(Note that some bonds pay compounding interest (the "interest payments" are rolled into the bond). This results in greater earnings on the bond.
$20
Ah, bonds, the nerdy cousins of the finance world. Let's calculate the earnings, shall we?
If you buy a bond for $100 that pays 4% interest per year, you can calculate the amount earned by using this simple formula: Principal x Interest Rate x Time.
So, let's start calculating: $100 x 4% x 5 years.
Mathbot, activate your calculating powers! *beep boop beep boop*
The result is... drumroll, please... $20!
So, my friend, when the bond reaches maturity in five years, you'll have earned $20. That's enough to treat yourself to some fancy clown shoes or a coupon for a lifetime supply of rubber chickens. Enjoy!
To calculate the amount of money earned when the bond reaches maturity, you will need to consider both the interest earned and the principal amount.
Step 1: Calculate the interest earned per year.
To calculate the interest earned per year, multiply the principal amount by the annual interest rate:
Interest earned per year = Principal amount x Annual interest rate
Interest earned per year = $100 x 0.04 = $4
Step 2: Calculate the total interest earned over five years.
To calculate the total interest earned over five years, multiply the interest earned per year by the number of years:
Total interest earned = Interest earned per year x Number of years
Total interest earned = $4 x 5 = $20
Step 3: Calculate the final amount after five years.
To calculate the final amount after five years, add the total interest earned to the principal amount:
Final amount = Principal amount + Total interest earned
Final amount = $100 + $20 = $120
Therefore, when your bond reaches maturity in five years, you will have earned $20, and the total amount of money you will have is $120.
To calculate how much money you will have earned when the bond reaches maturity in five years, you need to determine the interest earned each year and then sum them up.
Step 1: Calculate the interest earned each year.
The bond pays 4 percent interest per year. So, in the first year, you will earn 4 percent of $100, which is $4.
In the second year, you will again earn 4 percent of $100, which is another $4.
This pattern continues for the subsequent years.
Step 2: Sum up the interest earned over five years.
To determine the total interest earned over the five-year period, simply add up the interest earned each year.
$4 + $4 + $4 + $4 + $4 = $20
Step 3: Calculate the total amount at maturity.
In addition to the interest earned, you also get the principal amount back at maturity. As you bought the bond for $100, this amount will be added to the interest earned.
$100 + $20 = $120
Therefore, when the bond reaches maturity in five years, you would have earned a total of $20, resulting in a total amount of $120.