$1000 in a savings bond on the day you were born. The bond pays 6% interest compounded annually. How much is it worth in 18 yrs?
I know it earns $60 a yr. but I am lost after that.
P = Po(1+r)^n.
r = 6% / 100% = 0.06 = Annual % rate expressed as a decimal.
n = 1comp./yr * 18yrs = 18 compounding
periods.
P = 1000(1.06)^18 = $2854.34
To calculate the future value of the bond after 18 years, we will need to use the compound interest formula.
The compound interest formula is: A = P(1 + r/n)^(nt)
Where:
A = the future value (amount after a certain period)
P = the principal amount (initial investment)
r = the annual interest rate (expressed as a decimal)
n = the number of times that interest is compounded per year
t = the number of years
In this case:
P = $1000 (the initial investment)
r = 6% = 0.06 (since the annual interest rate is expressed as a decimal)
n = 1 (interest is compounded annually)
t = 18 (the number of years)
So, to calculate the future value of the bond after 18 years, we can plug these values into the compound interest formula:
A = 1000(1 + 0.06/1)^(1*18)
A = 1000(1 + 0.06)^18
A = 1000(1.06)^18
A ≈ $2,582.68
Therefore, the savings bond will be worth approximately $2,582.68 after 18 years.