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.