4.93% th $9000 T-bill with discount rate of 4.93% Work the following applied pro

Question

4.93% th $9000 T-bill with discount rate of 4.93% Work the following applied problems. 33. 47 Winston Churchill's grandfather, L. W. Jerome, In March nds (to pay for a road to a race track he owned 48 d$1000,t the Bronx). The bonds carried a 7% annual inter- Fi in what is no e semiannually. Mr. Jerome paid the interest until th 874, at which time New York City assumed responsibil pr 4 35. In March 1868, issued $1000 est rate payable or the bonds (and the road they financed). (Data from: New York Times, February 13, 2009.) a The first of these bonds matured in March 2009. At that time, how much interest had New York City paid on this bond?

Explanation / Answer

It's a 1000 $ bond with 7% interest rate paid semi-annually
a) After March 1874, NYC assumed responsibility
The first bond matured in 2009 so
number of years = 2009- 1874 = 135 years
each year they paid 7% of 1000$ in 2 installmenets of 3.5% each, so yearly interest paid = 70$

Thus, total interest paid = 135* 70 = 9450$;
Thus, interest paid by NYC on this bond = 9450$



b) After March 1874, NYC assumed responsibility
The second bond will mature in 2147 so
number of years = 2147- 1874 = 273 years
each year they paid 7% of 1000$ in 2 installmenets of 3.5% each, so yearly interest paid = 70$

Thus, total interest paid = 273* 70 = 19110$;
Thus, interest will have been paid by NYC on this bond upon maturity in March 2147 = 191100$

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