Question

Three years ago, you purchased a corporate bond that pays 5.8 percent. The purchase price was $1,000. What is the annual dollar amount of interest that you receive from your bond investment?

Answer 1

FV = PV(1 + r)n

FV = 1,000(1+0.058)3

FV = $1,184

Dollar amount of interest

= $1,184 - $1,000

= $184

Step-by-step explanation:

In this case, we need to determine the future value of $1,000 invested on the bond. Then we will deduct the present value from the future value so as to obtain the dollar amount of interest.