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15 December, 12:08

Muriel buys a $2,000 savings bond with a 4% coupon and 20 years to maturity. How much interest will she earn over the life of the bond?

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  1. 15 December, 12:37
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    To solve: use the simple interest calculation.

    interest earned over the life of the bond = (bond price) (coupon rate) (years)

    = (2,000) (0.04) (20)

    = $1,600

    So after 20 years on a 4% coupon bond starting at $2,000 Muriel will earn $1,600 in interest.
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