SOLUTION: David owns $20,000 worth of 10-year bonds of Ace Corporation. These bonds pay interest every 6 months at the rate of 2%/year (simple interest). How much income will David recei

Algebra ->  Percentage-and-ratio-word-problems -> SOLUTION: David owns $20,000 worth of 10-year bonds of Ace Corporation. These bonds pay interest every 6 months at the rate of 2%/year (simple interest). How much income will David recei      Log On


   

Question 1185138: David owns $20,000 worth of 10-year bonds of Ace Corporation. These bonds pay interest every 6 months at the rate of 2%/year (simple interest).
How much income will David receive from this investment every 6 months?


How much interest will David receive over the life of the bonds?
Answer by ikleyn(52914) About Me  (Show Source):
You can put this solution on YOUR website!
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David owns $20,000 worth of 10-year bonds of Ace Corporation.
These bonds pay interest every 6 months at the rate of 2%/year (simple interest).

(a) How much income will David receive from this investment every 6 months?

(b) How much interest will David receive over the life of the bonds?
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(a)  Use the formula for simple interest  I = P*r*t.


     In case (a),  I = 20000*0.02*0.5 = 200.


     David receives $200 simple interest every 6 months (0.5 of an year).    ANSWER




(b)  To answer (b), multiply $200 by 2 and by 10:   2 * 10 * $200 = $4000  simple interest in 10 years.    ANSWER


Solved.

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To see many other similar  (and different)  solved problems on simple interest accounts,  look into the lesson
    - Simple interest percentage problems
in this site.

Learn the subject from there.