A $600 bond earns 4.5% simple annual interest. Describe and correct the error finding the total interest earned after 18 months.

Question

i=PRT

=(600)(0.045)(18)

=486

Answer 1

Hi Kyli

 

When you are using 4.5% annual

the time has to be 1.5 years and not 18 months

so

I = 600*0.045*1.5

Answer 2

If the bond pays its interest yearly then after one year the owner receives $600×.045=$27

For the final six months the bond will accrue $600×.045×1/2=$13.50

The total interest earned is $40.50