Question

investment: john: the bond market
john bought a bond at $15,000 for 10 years at 3.5% simple interest.
six years later he sold the note to nicole, at an 8.25% simple discount
rate.

what was the maturity value of the original note?
answer:

Explanation:

Step1: Define maturity value formula

Maturity value for simple interest is $M = P(1 + rt)$, where $P$ is principal, $r$ is annual rate, $t$ is time in years.

Step2: Identify given values

$P = 75000$, $r = 0.0725$, $t = \frac{180}{360} = 0.5$

Step3: Calculate maturity value

Substitute values into the formula:
$M = 75000(1 + 0.0725 \times 0.5)$
$M = 75000(1 + 0.03625)$
$M = 75000 \times 1.03625$

Answer:

77718.75