Question

Jeff purchased a government bond, which has a maturity value of $3400 after 25 years at 11 1⁄4 % simple interest. How much should he pay for this bond?
Please help with a step by step!!

Answer 1

Answer: he should pay $891.8 for this bond

Step-by-step explanation:

The formula for determining simple interest is expressed as

I = PRT/100

Where

I represents interest paid on the government bond.

P represents the principal or amount paid for the government bond.

R represents interest rate

T represents the duration of the government bond in years.

From the information given

R = 11.25

T = 25 years

I = 3400 - P

Therefore,

3400 - P = (P × 11.25 × 25)/100

3400 - P = 2.8125P

2.8125P + P = 3400

3.8125P = 3400

P = 891.8

Answer 2

Answer:

$891.80

Step-by-step explanation:

A=Po=(1+rt)

3400=Po (1+(0.1125)(25))

3400=Po (3.8125)

3400/3.8125=Po (3.8125)/3.8125

Po=891.80