just need help solving this question

Question

If the government finances $104 billion worth of 15-year bonds at a fixed rate of 3.8% compounded quarterly, how much would it have to pay back when the bonds mature?

Answer 1

Using the compound interest formula (A=P(1+r/n)^nt) you have:

 

A=1.04x10¹¹, r=3.8/100=0.038, n=4, t=15

 

A= 1.04x10¹¹(1+0.038/4)⁴⁽¹⁵⁾= 183.5 billion dollars

Answer 2

A = P*(1+r/n)^(nt) is the formula.

 

Substituting the given values:

A = 104000000000*(1+(0.038/4))^(4*15)

 

Using my scientific calculator I get A ≈ $183,405,660,831.86.

 

You have to know how your calculator works; they are often different.

 

I used the following sequence of keys to solve for A on my calculator:

0.038 [÷] 4 [+] 1 [=] [y^x] 60 [=] [x] 104000000000 [=]

 

Answer 3

104(1+0.038/4)^(4*15) = 183.4956608 billinon dollars