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Suppose some government bonds are paying 5.8% simple interest. How much should you invest in the bonds if you want them to be worth $5,000 in 9 years? Round your final answer to two decimal places.

Sagot :

The simple interest formula is given by:

[tex]FV=PV(1+in)[/tex]

FV: future value

PV: present value

i: interest rate

n: interest periods

We have from the question:

FV: $5000

PV: ?

i: 5.8%

n: 9.

Then:

[tex]5000=PV(1+(0.058\cdot9))[/tex]

Thus

[tex]PV=\frac{5000}{1.522}\Rightarrow PV=3285.15[/tex]

Then, we should invest in $3285.15 to have $5000 in 9 years.

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