You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10%.At maturity the bond will be worth:
A) $228.17.
B) $200.
C) $259.37.
D) $271.17.
E) $217.71.

Question

Quizplus · Accepted Answer

The value of the bond at maturity can be calculated using the formula for compound interest: A = P(1 + r/n)^(nt), where A is the amount of money accumulated after n years, including interest, P is the principal amount ($100), r is the annual interest rate (10% or 0.10), n is the number of times that interest is compounded per year, and t is the time the money is invested for in years. Since the bond pays an annual interest rate and doesn't specify compounding more frequently, we assume n = 1. Therefore, A = $100(1 + 0.10)^10 = $100(1.10)^10 = $259.37.

You Buy Your Child a $100 Savings Bond That Matures