Question

Austin bought a savings bond for $6,000 that matures in 18 months. If its interest is compounded monthly at a rate of 1.3%, what will the savings bond be worth at its maturity date? Round to the nearest cent, if necessary.

a) CA $6,078.47
b) $7,284.22
c) $6,078.48
d) $6,118.08

Answer 1

The value of the savings bond at maturity is $6,078.47.

Step-by-step explanation:

To calculate the value of the savings bond at maturity, we can use the formula for compound interest:

A = P(1+r/n)^(nt)

Where:

• A is the final amount
• P is the principal amount (original investment)
• r is the annual interest rate (as a decimal)
• n is the number of times that interest is compounded per year
• t is the number of years

In this case, P = $6,000, r = 1.3% (or 0.013 as a decimal), n = 12 (compounded monthly), and t = 1.5 years. Plugging these values into the formula:

A = 6000(1+0.013/12)^(12*1.5) = $6,078.47

Therefore, the correct answer is a) CA $6,078.47.