On September 30, 2019, Stinky Bank issued 10-year bonds at an annual simple interest rate of 4.25%, with interest paid twice a year. Pepe le Pew purchases a $10,000 bond. How much interest will Pepe earn every six months? How much interest will he earn over the 10-year life of the bond?
On September 30, 2019, Stinky Bank issued 10-year bonds at an annual simple interest rate of 4.25%, with interest paid twice a year. Pepe le Pew purchases a $10,000 bond. How much interest will Pepe earn every six months? How much interest will he earn over the 10-year life of the bond?
Chapter5: Introduction To Business Expenses
Section: Chapter Questions
Problem 61P
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Question
- On September 30, 2019, Stinky Bank issued 10-year bonds at an annual simple interest rate of 4.25%, with interest paid twice a year. Pepe le Pew purchases a $10,000 bond.
- How much interest will Pepe earn every six months?
- How much interest will he earn over the 10-year life of the bond?
Expert Solution
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Step 1 Part 1
Calculation of interest Pepe will earn every six months:
Hence, Pepe will earn $212.5 every six months
Formula sheet for calculation of interest is shown below:
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