Pinnacle Industrial Group invests $850,000 of surplus capital into a specialized industrial equipment financing bond that compounds quarterly at an annual rate of 7.35%. The bond matures in 8.5 years, but the company plans to evaluate its value at the exact maturity date to assess reinvestment opportunities.
Correct Answers
future_value
$1,578,634.98
interest_earned
$728,634.98
Step-by-Step Solution
Compound Interest Formula: FV = P × (1 + r/m)^(m×t) Principal (P): $850,000.00 Annual Rate: 7.35% Compounding: quarterly (m = 4) Total periods (n): 34 Rate per period (r/m): 1.8375% FV = $850,000.00 × (1 + 1.8375%)^34 FV = $850,000.00 × 1.857218 FV = $1,578,634.98 Interest Earned = FV − Principal = $1,578,634.98 − $850,000.00 = $728,634.98