John Cleaver's grandfather died in 2015 and left him a trunk that had been locked in his attic for years. At the bottom of the trunk John found a packet of 50 U.S. Savings Bonds that had never been cashed in. The bonds were purchased for $11.50 each in 1923, and pay 3% interest as long as they're held. (Assume annual compounding.) (Government savings bonds like these accumulate and compound their interest unlike corporate bonds, which regularly pay out interest to bondholders.)
a. How much are the bonds worth in 2015?
b. How much would they have been worth if they paid interest at a rate more like that paid during the 1970s and 80s, say 7%?
c. Comment on the difference between the answers to parts a and b?