Question

In order to pay for college, the parents of a child invest $30,000 in a bond that pays 6% interest compounded semiannually. How much money will there be 18 years? Round your answer to the nearest cent.

In 18 years the bond will be worth

Answer 1

Using the formula for future value with compound interest, the $30,000 bond at a 6% interest rate compounded semiannually will be worth approximately $86,948.92 in 18 years, when rounded to the nearest cent.

Step-by-step explanation:

To calculate the future value of a bond that pays 6% interest compounded semiannually, we use the future value formula for compound interest:

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

Where:

• P = initial principal balance ($30,000)
• r = annual interest rate (0.06)
• n = number of times the interest is compounded per year (2)
• t = time in years (18)

Plugging the numbers into the formula:

FV = $30,000 * (1 + 0.06/2)^(2*18)

FV = $30,000 * (1 + 0.03)^(36)

FV = $30,000 * (1.03)^36

FV = $30,000 * 2.8982972498

FV = $86,948.91749

Thus, in 18 years the bond will be worth approximately $86,948.92 when rounded to the nearest cent.