Question

on January 1, you purchased a savings bond with a face value of $1,000 and a discount rate of 15 percent. You will sell the bond in December for the face value of $1,000. How much will you earn on this investment?

Answer 1

You will earn $150 on this investment. Please use the explanation below to remember the steps.

Explanation:

The discount rate is the amount by which the face value of the bond is reduced when it is purchased.

So, the purchase price of the bond is the face value minus the discount.

The discount is 15 percent of $1,000, which is $150.

So, the purchase price of the bond is $1,000 - $150 = $850.

When you sell the bond in December, you will receive the face value of $1,000.

So, the earnings on this investment is the selling price minus the purchase price.

The earnings is $1,000 - $850 = $150.

So, you will earn $150 on this investment.