Question

While banks usually pay compound interest, bonds usually pay simple interest. a) Suppose you invest $1500 in a savings bond that pays 10% simple interest per year. How much total interest will you receive in 5 years?

Answer 1

The total interest you will receive in 5 years for a savings bond that pays simple interest is $750.

Step-by-step explanation:

To calculate the total interest for a savings bond that pays simple interest, we can use the formula:

Total Interest = Principal x Rate x Time

Given that the principal is $1500, the rate is 10% (or 0.10), and the time is 5 years, we can substitute these values into the formula:

Total Interest = $1500 x 0.10 x 5 = $750

Therefore, you will receive a total interest of $750 in 5 years.