Question

Keck industries is planning to issue $7 million in bonds with a six-year maturity date and an annual rate of 5.4 percent. how much will they pay in interest over the life of the bonds?

Answer 1

The equation to be used is

$F=P (1+i)^{n}$

where P is the present worth equal to $7 million, i is the annual interest rate of 5.4% and n is the number of years which is equal to 6 years. Then,

$F = 17 \ million(1+0.054)^{6}=2,330,733.33$

Therefore, the Keck Industries will pay $2,330,733 over the life of the bonds.