Discount Bond Help

Question

Topaz Financial Company invested $7034 in discount bonds with face values totaling $11725. The discount rate was 2.5%. How many years will it be until the bonds mature? Round your answer to 2 decimal places.

Answer 1

Use the formula

 

FV = PV(1+r)^t

FV = future value

PV = present valur

r = discount rate

t = time

 

11725 = 7034 (1+.025)^t

1.6669 = 1.025^t

ln(1.6669) = t ln(1.025)

 

ln(1.6669)/ln(1.025 = t

 

t = 20.69 years