Keystone Industrial Corp. invests $425,000 of retained earnings into a high-yield corporate bond fund offering 7.35% annual interest compounded quarterly. The company plans to hold this investment for 8 years to fund a major capital expansion project.
Correct Answers
future_value
$761,090.44
interest_earned
$336,090.44
Step-by-Step Solution
Compound Interest Formula: FV = P × (1 + r/m)^(m×t) Principal (P): $425,000.00 Annual Rate: 7.35% Compounding: quarterly (m = 4) Total periods (n): 32 Rate per period (r/m): 1.8375% FV = $425,000.00 × (1 + 1.8375%)^32 FV = $425,000.00 × 1.790801 FV = $761,090.44 Interest Earned = FV − Principal = $761,090.44 − $425,000.00 = $336,090.44