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Published byLeslie Pollard Modified over 3 years ago

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Planning for the Future How you spend and invest your money can have an impact on your lifestyle at a later time. What might you want to start saving for in the near future?

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Lesson Objective Compute the annual interest and annual yield of a bond investment. Content Vocabulary mutual fund A kind of investment offered by an investment company, which accumulates the saving of many individuals and invests them in a portfolio of stocks, bond, or both.

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George Vanderhill purchased a $1,000 bond at the quoted price of 89½. The bond paid interest at a rate of 6 percent. Find the interest, the cost of the bond, and the annual yield. Example 1

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Find the annual interest. Face Value × Interest Rate $1,000.00 × 6% = $60.00 Example 1 Answer: Step 1

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Find the bond cost. Face Value × Percent $1,000.00 × 89½% = $895.00 Example 1 Answer: Step 2

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Find the annual yield. Annual Interest Bond Cost $65 = 0.072625 or 7.26% $895 Example 1 Answer: Step 3

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A $50,000 bond from Bayview at 103 pays 5 percent annual interest. a.What is the annual interest? b.What was the cost of the bond? c. What is the annual yield? Practice 1

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a.$2,937.50 b.$51,500 c. 5.7% Practice 1 Answer

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Amy Wendell purchased four $10,000 bonds at 95.75. The bonds pay an annual interest rate of 6 percent. Practice 2

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Practice 2 (cont.) a.What is the total cost of the purchase? b.What will be her yearly total interest earnings? c.What is the annual yield?

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a.$38,300 b.$2,750 c.7.18% Practice 2 Answer

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