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$55,000 is invested in a 5-year fixed interest bond paying 5.2% per year. if interest is reinvested in the account, how much will the bond be worth in 5 years? round your answer to the nearest dollar.

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Final answer:

To calculate the future value of the $55,000 bond invested for 5 years at a 5.2% annual interest rate, with compounded interest, the bond will be worth approximately $70,673 after the end of the 5 years.

Step-by-step explanation:

The question involves calculating the future value of an investment in a fixed interest bond where interest is compounded annually. An amount of $55,000 is invested at an annual interest rate of 5.2%. We can use the formula for compound interest to calculate the value of the bond after 5 years.

The compound interest formula is:

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

Where:

A is the amount of money accumulated after n years, including interest.

P is the principal amount (the initial amount of money).

r is the annual interest rate (in decimal form).

n is the number of times that interest is compounded per year.

t is the time the money is invested for, in years.

Since the bond pays interest annually, n will be 1. Therefore, for this investment:

A = 55000(1 + 0.052/1)^(1*5)

After calculating the power and the multiplication:

A ≈ 55000(1 + 0.052)^5

A ≈ 55000 * 1.285689

A ≈ 70673

Therefore, after 5 years, when the interest has been reinvested annually, the bond will be worth approximately $70,673, rounded to the nearest dollar.

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