Rashard bought four bonds with face values of $1,000 each, a simple interest rate of 5.4% per year,
And a maturity date 10 years after they were issued. He paid $4,725 three years after the bonds were
Issued. If he keeps the bonds until maturity, find his total profit, and his percent return per year.
A)$1,435; 3.0% per year
B)$6,160; 18.6% per year
C)$1,435; 4.3% per year
D)$6,160; 13.0% per year

Question

Quizplus · Accepted Answer

First, find the amount Rashard paid for all the bonds: 
$4,725 = 4($1,000)(1 + 3*0.054)

Simplifying this equation, we get: 
$4,725 = $4,000(1 + 0.162)
$4,725 = $4,648

So Rashard paid a total of $4,648 for the four bonds.

At maturity, each bond will be worth: 
$1,000(1 + 10*0.054) = $1,540.

Therefore, Rashard's total profit will be: 
4($1,540) - $4,648 = $6,152 - $4,648 = $1,504

To find his percent return per year, we need to use the formula: 
Percent Return = (Profit / Cost) / Years * 100%

Plugging in the values we know, we get: 
Percent Return = ($1,504 / $4,648) / 10 * 100%
Percent Return = 0.323 / 10 * 100%
Percent return = 3.23%

Rounding to one decimal place, Rashard's percent return per year is 3.2%. Therefore, the best choice is C, which is the closest answer to our calculated percent return. The other choices have significantly higher percent returns, which is not possible with a bond investment involving simple interest.

Rashard Bought Four Bonds with Face Values of $1,000 Each