Paul bought a 15-year treasury bond for a face amount of $600. The 2.5% interest will be compounded quarterly. What will the fut

Question

EleoNora [17]

4 years ago

15

Paul bought a 15-year treasury bond for a face amount of $600. The 2.5% interest will be compounded quarterly. What will the fut

ure value of Patrick's investment be when he goes to cash it in on the maturity date 15 years from now?

Mathematics

2 answers:

MArishka [77] · Answer 1 · 2021-11-15T18:36:26+03:00

MArishka [77]4 years ago

8 0

Answer:

871.53

Step-by-step explanation:

Alika [10] · Answer 2 · 2021-11-15T17:24:52+03:00

First, we convert the interest such that it is compounded annually. The formula would be:

ieff = (1 + i/m)^m - 1
where m = 4, since there are 4 quarters in a year
ieff = (1 + 0.025/4)^4 - 1
ieff = 0.0252

Then we use this for this equation:
F = P(1 + i)^n, where F is the future worth, P is the present worth and n is the number of years
F = $600(1 + 0.0252)^15
F = $871.53